Strong global de­mand sup­ports ex­ports, ends re­ces­sion

The Star Early Edition - - INTERNATIONAL - Claire Mil­hench

STRONGER-than-ex­pected Chi­nese eco­nomic growth data and re­duced chances of an­other US rate rise this year lifted emerg­ing stocks to their high­est since the end of April 2015 yes­ter­day, track­ing gains in de­vel­oped mar­kets.

MSCI’s bench­mark emerg­ing mar­kets eq­uity index rose 0.4 per­cent af­ter data showed the world’s sec­ond largest econ­omy grew by 6.9 per­cent in the sec­ond quar­ter, beat­ing an­a­lysts’ fore­casts.

The index has risen al­most 5 per­cent in the last five trad­ing days.

Wil­liam Jackson, se­nior emerg­ing econ­o­mist at Cap­i­tal Eco­nomics, also high­lighted stronger-than-ex­pected Chi­nese in­dus­trial pro­duc­tion, re­tail sales and fixed in­vest­ment data.

“Some of the lower pro­file data sug­gests the econ­omy is pretty strong,” he said.

“De­spite all the fears about pol­i­tics in de­vel­oped and emerg­ing mar­kets, the eco­nomic en­vi­ron­ment is rel­a­tively favourable with rel­a­tively strong global de­mand sup­port­ing ex­ports, the fis­cal aus­ter­ity seen in some coun­tries eas­ing off, and some coun­tries that have been in re­ces­sion com­ing out of that,” he added.

Asian stocks hit a two-year high with Hong Kong shares up 0.3 per­cent, but Chi­nese main­land stocks

fell more than 1 per­cent, af­ter a sharp sell-off in small caps.

The Chi­nese yuan firmed, how­ever, af­ter the cen­tral bank lifted its of­fi­cial guid­ance for the cur­rency’s mid­point to an 8½ month high.

In emerg­ing Europe, Hun­gar­ian stocks reached new all-time highs, Pol­ish shares gained 0.6 per­cent to a one-month high, while Turk­ish and Czech stocks gained 0.4 per­cent.

Emerg­ing mar­kets were also un­der­pinned by the di­min­ish­ing chances of a third US in­ter­est rate rise this year af­ter Fri­day’s weak in­fla­tion data and a sur­prise fall in US re­tail sales.

The dol­lar fell to 10-month lows and US Trea­sury yields slipped to multi-week lows in the wake of the data, while stocks ral­lied hard. Fed­eral Re­serve chair­per­son Janet Yellen also in­di­cated on Wed­nes­day that the Fed’s rate hikes could be grad­ual rather than fast.

Emerg­ing cur­ren­cies posted small moves. The Pol­ish zloty lost 0.1 per­cent against the euro af­ter week­end protests against the rul­ing party’s ju­di­cial re­forms.

“It’s a wor­ry­ing con­tin­u­a­tion of a trend with the Law and Jus­tice party… but it doesn’t seem to have af­fected the zloty in a big way to­day,” Jackson said.

“The dom­i­nant fac­tor here is you have quite a strong ex­ter­nal po­si­tion for the Pol­ish econ­omy… so there is no fun­da­men­tal rea­son for it to weaken sharply or in any sus­tained way.

The Turk­ish lira slipped 0.3 per­cent against the dol­lar af­ter Pres­i­dent Tayyip Er­do­gan stepped up his at­tacks on the EU on Sun­day and vowed to bring back the death penalty if par­lia­ment passed it.

The South African rand firmed 0.2 per­cent to a twoweek high, helped by higher pre­cious me­tals prices while the rou­ble slipped 0.2 per­cent but re­mained near a two-week high, un­der­pinned by higher oil prices.

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