EMERGING MARKETS-Asian equities climb to record highs; ringgit at five-year high

By Nichiket Sunil

Jan 23 (Reuters) - Equities in Emerging Asia rose to record highs on Friday, while the Malaysian ringgit surged to a five-year high as traders gauged the positive effects of strong economic growth and an optimism annual outlook.

Markets in the region extended their climb into a second session after U.S. President Donald Trump pulled back his threats of tariffs on European imports and ruled out taking Greenland by force.

The MSCI gauge of EM Asia stocks .MIMS00000PUS rose 0.7% to a record high, while a separate index tracking ASEAN stocks .MISU00000PUS advanced 0.8%, reaching its highest point in six years.

In Malaysia, the ringgit MYR= strengthened 0.6% to 4.015 against the dollar, a level not seen since January 2021. The surge came a day after the central bank left its key interest rate unchanged and projected 2025 economic growth at the upper end of forecasts, noting that momentum is expected to carry into the year ahead.

The central bank's mostly neutral stance on its monetary policy highlighted Malaysia's strong economic fundamentals, while optimism gained on the Southeast Asian economy's growth prospects for the year ahead.

"Ringgit's outperformance seen in 2025 is likely to spill over to 2026," said Christopher Wong, a currency strategist at OCBC.

"Domestically, Malaysia's fundamentals remain encouraging, supported by quality FDI inflows, upbeat growth, a wider trade surplus and clear commitment to fiscal consolidation."

The Indonesian rupiah IDR= extended its recovery mode into a third consecutive session, gaining up to 16,838 against the dollar. Earlier in the week, the currency slumped to an all-time low of 16,985 on concerns of wider fiscal deficit and the central bank's independence.

Singapore's FTSE Straits Times index .STI rose as much as 1.1% to an all-time high of 4,888.960 points. The financials-heavy benchmark has gained nearly 5% so far this year as investors eyed Singaporean banks' stable earnings and dividend yields.

"We think the risk-on sentiment is one of the factors contributing to outperformance of the Singapore markets," DBS Group Research analysts told Reuters.

"Investors may also be positioning in banks with potential scope for dividend upside in upcoming results, alongside the quality they offer."

In East Asia, stocks in South Korea .KS11 and Taiwan .TWII touched record highs. A revival of the risk-on sentiment helped put artificial intelligence-linked assets back on the spotlight.

Meanwhile, Japan's Nikkei .N225 extended gains while the yen JPY=EBS traded weaker after the Bank of Japan kept interest rates steady and raised its economic and inflation forecasts. .T

HIGHLIGHTS:
Singapore banks: DBS DBSM.SI, OCBC OCBC.SI and UOB UOBH.SI rise between 1% and 4%

China likely to set 4.5%-5% growth target in 2026, SCMP reports
Indian airline IndiGo warns of higher costs after mass cancellations hit profit
Japan's factory activity returns to growth after seven months, PMI shows