EMERGING MARKETS-Asian stocks rally on Iran optimism, rupiah recovers from record low

By Sneha Kumar

April 1 (Reuters) - Emerging Asian stock markets rallied on Wednesday after U.S. President Donald Trump raised market hopes for a potential de-escalation in the Middle East conflict, while Indonesia's rupiah reversed its course after hitting a record low.

Trump suggested that the United States could wrap up its military campaign against Iran within two to three weeks, with or without a deal.

The MSCI gauge of EM Asia equities .MIMS00000PUS surged about 5% after four straight sessions of declines, helped by a more than 8% leap in South Korea's KOSPI index .KS11 and a 4.6% jump in Taiwan shares .TWII. The two tech-heavy markets account for about 40% of the MSCI index.

After its worst month since the global financial crisis, Seoul's benchmark stock index got off to a brighter start in April, with Samsung Electronics 005930.KS soaring 13% and SK Hynix 000660.KS climbing 11%.

A more than 5% rise in Taiwan Semiconductor Manufacturing Company 2330.TW helped Taipei's benchmark stock index log its biggest single-day gain since April 2025.

"The headlines may have served as a spark. But the big rally in risk was almost certainly driven by portfolio rebalancing and dealer flows," said Kyle Rodda, a senior financial analyst at Capital.com.

"The accelerant to these moves was dealers who, owing to the volatility of the month, were forced to chase the moves to keep their books hedged and risk neutral."

Philippine equities .PSI rose 1.7%, hitting their highest level in nearly a week, while Singapore shares .STI climbed as much as 2% to touch their strongest level in nearly two weeks.

Indonesia's Jakarta Composite Index .JKSE gained as much as 2.3% after declining for the last four sessions, while the rupiah IDR= was last up 0.2%.

Earlier in the day, the currency weakened as much as 0.2% to breach the psychologically crucial level of 17,000 against the U.S. dollar for the first time.

There is perhaps some stability in the rupiah for now, with the central bank actively intervening in the FX market to cap depreciation, said MUFG senior currency analyst Lloyd Chan.

Indonesia's central bank stepped in with measures earlier this week to prop up the rupiah, as part of its wider push to keep financial markets stable.

The currency had been under pressure amid investor concerns over fiscal deficit, central bank autonomy and stock market governance before rising oil prices posed fresh problems.

A softer U.S. dollar lent support to other Asian currencies, with the South Korean won KRW=KFTC appreciating 1.3% and the Philippine peso PHP= advancing 0.7%. The Malaysian ringgit MYR= appreciated 0.7% after a seven-day losing streak.

HIGHLIGHTS:

Yield on Indonesia's 10-year bonds ID10YT=RR falls to 6.848%

South Korea and Indonesia discuss energy security, sign agreements on minerals and tech

Principal eyes South Korea bonds on global index inclusion, joining other large investors