Emerging stocks hit a two-week high
A SUBDUED dollar and Chinese plans to ease access to its equity markets for foreign investors helped emerging stock markets rally to a two-week high yesterday, while currencies chalked up solid gains.
MSCI’s emerging market index extended gains for a second day to rally 1.3 percent, with Chinese mainland stocks ending the trading session some 2.8 percent higher – their best day in around two years.
China’s bourses sailed higher after its securities regulator said on Sunday that it planned to ease restrictions on foreign investment in the Shanghai and Shenzhen stock markets, and told banks to significantly cut lending rates to small businesses.
The gains followed a savage sell-off last week, driven by fears over a full-blown trade war between Washington and Beijing.
China’s currency, which had its worst month on record in June, also looked strong, with the offshore yuan strengthening 0.7 percent against the dollar, set for its biggest daily rise in 14 weeks.
“One of the most important drivers is a lack of escalation of trade wars and the yuan’s stability,” said Inan Demir, senior emerging economist at Nomura International.
“That also reinforces the case that the trade war will be less of a destabilising factor and the yuan will not be used as another weapon in (it).”
The US and China slapped tit-for-tat duties on $34 billion (R457.1bn) worth of each other’s imports on Friday.
The dollar, suffering from Friday’s mixed jobs report and easing for a third straight session, also provided breathing space for other emerging currencies.
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Turkey’s lira strengthened 0.6 percent in a fourth straight day of gains as markets awaited details of President Tayyip Erdogan’s new economic team. Investors say appointing market-friendly cabinet members is key for future economy management and policies, and to restore trust in the lira. Turkey shifted to an all-powerful executive presidency yesterday, ending its decades-long parliamentary democracy, and Erdogan will serve as its first head after winning an election last month.
The rand strengthened 0.4 percent and Russia’s rouble added 0.3 percent.
Ethiopia’s dollar-denominated bonds rose to their highest in 10 weeks yesterday after the country’s new reformist Prime Minister Abiy Ahmed met with Eritrea’s Isaias Afwerki on Sunday – the first summit between the two.
Abiy said they agreed to re-open embassies in each others’ capitals, and that his landlocked nation of 100 million would begin using a port in Eritrea.