EMERGING MARKETS-Asian stocks find relief as Trump's pause sends oil prices lower

By Shivangi Lahiri

March 27 (Reuters) - South Korean shares recouped most of their early losses on Friday, tracking a broader recovery in emerging Asian equities after U.S. President Donald Trump's decision to pause attacks on Iran's energy infrastructure for 10 days sent oil prices lower.

Asian stocks found temporary relief as oil prices fell, slightly easing pressures of inflation and currency across the region's oil-importing economies.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS recovered slightly to trade down 0.6%. Its broader EM Asia index .MIMS00000PUS declined 0.7%.

Equities in South Korea .KS11 closed 0.4% lower, but clawed back from session lows of 4.4%. Meanwhile, the South Korean won KRW=KFTC edged higher to 1,508.9 per dollar.

The South Korean government has launched emergency measures to protect the economy in the face of the worsening Middle East conflict, including carrying out a 5-trillion-won ($3.32 billion) emergency bond buyback and expand fuel tax cuts.

Elsewhere, benchmark gauges in Taiwan .TWII and Indonesia .JKSE declined around 0.7% and 0.9%, respectively.

"We have already seen a pattern of de-risking into weekends followed by sharper moves in North Asia early the following week," said Billy Leung, investment strategist at Global X ETFs Australia.

"The riskiest markets remain those with high beta to global growth and AI positioning, particularly Korea and Taiwan."

Meanwhile, shares in Singapore .STI and Thailand .SETI were trading flat to higher.

With the conflict set to enter its second month next week, analysts said emerging Asia faces an immediate hit from higher fuel costs, with broader risks stemming from spillover into transport, food, FX and inflation expectations, especially in energy-importing economies.

Local government bonds have also come under pressure.

Ringgit government bonds saw mild selling pressure ahead of an auction, while front-ends softened in line with a weaker currency, Maybank analysts wrote.

"The correlation between equities and bonds has increased, reducing diversification benefits within EM Asia," Leung added.

Among other emerging Asian currencies, the Philippine peso PHP= sank to a record low of 60.413 against the dollar, while the Indonesian rupiah IDR= was last quoted at 16,963 a dollar.

Christopher Wong, a currency strategist at OCBC, said that while de-escalation headlines may trigger brief relief rallies, the lack of a clear resolution is likely to keep most Asian currencies ex-Japan under pressure, with policy support only cushioning, not reversing, the downside.

In other regions, the Malaysian ringgit MYR= slipped to 4.007 against the dollar, while stocks in Kuala Lumpur .KLSE were largely unchanged.

"Even as Malaysia's position as a net commodity exporter can support the MYR, the currency may still soften in broader risk-off environments given its exposure to global sentiment and portfolio flows," Wong added.

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($1 = 1,506.9300 won)