SE Asia stocks higher on MSCI's decision on China shares

SE Asia stocks higher on MSCI's decision on China shares

Most Southeast Asian stocks rose on Wednesday as index provider MSCI's decision to not add domestic Chinese stocks to one of its key benchmarks boosted sentiment, even as investors waited for a signal from the Federal Reserve on interest rate increases this year.

US index provider MSCI Inc on Tuesday declined to add domestic Chinese stocks to its Emerging Markets Index, delivering a blow to Chinese policymakers hoping to broaden the appeal of their currency.

"It seems that it is a welcome development that China's domestic equities were denied entry to MSCI," said Manny Cruz, an analyst with Asiasec Equities Inc.

"If ever that will push through, most of the regional funds would be hurt, as they would be repositioned from other Asian markets towards China."

The Federal Reserve is expected to keep interest rates unchanged on Wednesday and signal if it still plans to raise rates twice in 2016 amid concerns about a US hiring slowdown and Britain's possible exit from the European Union.

Investors were also keeping an eye out for Britain's June 23 vote to leave the 28-member bloc, dubbed Brexit, which could tip Europe back into recession and throw global financial markets into turmoil.

"I think cautiousness is still there in the markets, and may be a little bit of bargain-hunting. There could be some relief after the Fed meeting, assuming they would keep the rates unchanged," said April Lee-Tan, an analyst with COL Financial.

The Philippine index was the biggest gainer in the region, recovering from Tuesday's losses to end more than half a percent higher. The Philippine share market's six-year bull run ended in

2015 as investors withdrew funds from many emerging markets.

Singapore and Vietnam rose marginally at 0.2%, while Indonesia bucked the trend to drift 0.1% lower.

"Indonesian market is down mainly because of the cigarette sparks today," said Harry Su, an analyst with Indonesia-based Bahana Securities, referring to local media reports that said the government may soon raise tobacco taxes.

"There is concern that there could be traditional policy risks related to excise tax."

Shares of clove cigarette maker Gudang Garam Tbk PT dropped 5.4%, while Hanjaya Mandala Sampoerna Tbk PT lost 5.7%.

The government has raised excise taxes for big cigarette companies including Sampoerna by an average 15% this year, higher than the average 10-11% in previous years.

Tobacco taxes account for almost 10% of government revenues, official data shows. 

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