Tensions ease across Asian markets on Fed's no-surprise tapering signal

ASIAN equity gauges rallied on Thursday with Hong Kong, back from the holiday, posting the biggest 1.2 per cent gain, after the US central bank - true to expectations - left monetary policy unchanged, kicking the can (on a tapering decision) down the road to November.

Key gauges in the region except for South Korea, grabbed the chance to cheer the no-surprise signals from the US Federal Reserve. After a two-day Federal Open Market Committee (FOMC) meeting, chairman Jerome Powell delivered the expected advance notice that tapering bond buying "may soon be warranted" (likely in November).

The Fed also prepared the ground that it plans to announce as early as November that it will start pulling back the extraordinary measures that were put in place to support the world's largest economy amid growing optimism of a recovery.

"The more hawkish outcome of the FOMC meeting is seen as a sign of strength that the US economic recovery and reflation of the economy is on the right path," said Julius Baer chief economist David Kohl.

Australia's key index advanced 1 per cent, while Singapore and Taiwan rose 0.9 per cent and China inched up 0.4 per cent. Malaysia added 0.7 per cent, while Indonesia rose 0.6 per cent. Japan was on holiday.

"Timing and the pace of tapering looks to be largely in line with consensus, with no need to accelerate the process," said Nomura Research.

Even so, most analysts viewed the Fed's latest so-called "dot plots" on the direction of the federal funds rate as slightly more hawkish than expected. The 18 members are evenly split on whether rates should stay put or lift off in 2022 versus back in June, when seven officials were forecasting a rate rise in 2022.

"While this hawkish shift is likely to fuel rate-hike expectations, it points to the market being much more sensitive to US economic data going forward," said FXTM senior research analyst Lukman Otunuga.

Improved sentiments towards risky assets across Asia followed sharp overnight gains in Wall Street and as fears eased over the contagion risks of debt-roiled China Evergrande Group.

Shares of Evergrande, the world's most indebted property developer, surged in Hong Kong after the troubled property giant struck an agreement with Chinese bond holders. Following a volatile trading session, the counter finished the day higher by 17.6 per cent.

Still, regional markets' anxiety over the Evergrande saga have far from dissipated; the focus will be on whether Beijing will support the restructuring of the giant builder and prevent systemic risks.