EMERGING MARKETS-S.Korean shares post best month since 2001; Asia FX firms as trade deal lifts sentiment

By Rajasik Mukherjee

Oct 31 (Reuters) - South Korean equities recorded their strongest monthly gain in more than two decades and the won firmed on Friday, as a wave of U.S. trade deals across Southeast Asia lifted investor sentiment and supported modest gains in most Asian currencies.

South Korea's won KRW=KFTC appreciated 0.7% against the dollar to 1,424.80 and the benchmark KOSPI index .KS11 hovered near the record high of 4,146.72 it notched on Thursday.

The KOSPI touched record levels three times this week, surging 20% in October for its best monthly performance since January 2001.

The country has emerged as a key beneficiary of the global artificial intelligence boom, with its heavyweight chipmakers and tech firms attracting strong investor interest amid rising demand for high-performance computing.

Its export-driven economy is also gaining from recent trade deals with the United States, while robust corporate earnings have propelled equities to record highs.

Easing trade tensions after U.S. agreements with regional economies and renewed dialogue with China have boosted risk appetite in emerging Asia, helping currencies rebound from pressure tied to U.S. rate uncertainty and geopolitical jitters.

"From a monetary policy perspective, these trade agreements further reduce the urgency for further policy easing in Emerging Asia's more export-oriented economies, in our view, especially in Southeast Asia," Barclays said.

For the week, Malaysia's ringgit MYR=, up 0.7%, was headed for its best week since August. The Thai baht THB=TH rose 1.2% this week and was set to log its best week since September.

On Thursday, Thailand's finance minister said the country's economy was expected to grow at a higher pace than previously estimated.

The baht has gained more than 6% this year and is one of the best-performing currencies in the region, although that strength is seen as a risk to exports and tourism, two key drivers of Thailand's economy.

Alicia García Herrero, Chief Economist for Asia Pacific at Natixis said that Washington's recent approach to ASEAN reflects a strategic shift.

The U.S. appears to be adopting a more balanced approach to rebuild ties with Southeast Asian nations," Alicia added.

On the equities front, Taiwan's benchmark equity gauge .TWII fell 0.2% while Thai stocks .SETI and Singapore stocks .STI traded largely flat.

HIGHLIGHTS:

Core consumer prices in Japan's capital accelerate, keep BOJ under pressure

China factory activity stumbles as export orders dry up

Pentagon chief joins Southeast Asian meet to shore up US ties

Thailand says PM to meet China's Xi at APEC summit on Friday