Trump’s de­feat sends emerg­ing stocks into or­bit

The Star Early Edition - - INTERNATIONAL - Claire Mil­hench

EMERG­ING stocks flirted with 27-month highs yes­ter­day while cur­ren­cies firmed a touch as the dol­lar traded at 10-month lows af­ter the col­lapse of a key US health care bill raised doubts about Pres­i­dent Don­ald Trump’s re­form agenda.

MSCI’s bench­mark emerg­ing stocks in­dex held at lev­els not seen since end-April 2015, still un­der­pinned by Mon­day’s solid Chi­nese eco­nomic growth data, which beat con­sen­sus fore­casts and showed firmer ex­ports and pro­duc­tion.

Chi­nese main­land shares rose 0.3 per­cent af­ter fall­ing 1.4 per­cent on Mon­day due to a sharp sell-off in small caps, and Hong Kong gained 0.2 per­cent.

Rus­sian dol­lar-de­nom­i­nated stocks also rose 0.4 per­cent, helped by higher oil prices.

But gains were off­set by losses in other mar­kets. Turk­ish stocks fell 0.5 per­cent and In­dian shares slipped 0.6 per­cent from the record highs hit in the pre­vi­ous ses­sion. Higher taxes on cig­a­rette mak­ers clob­bered in­dex heavy­weight ITC.

Emerg­ing cur­ren­cies made mar­ginal gains af­ter the dol­lar slipped 0.4 per­cent against a bas­ket of cur­ren­cies, hit by the fail­ure of the re­vised US health care re­form bill .

“(It raises) doubts about Pres­i­dent Trump’s abil­ity to re­flate the econ­omy,” said Inan Demir, senior emerg­ing econ­o­mist at No­mura. Fad­ing US rate hike bets have also weighed on the dol­lar af­ter Fed­eral Re­serve chair­per­son Janet Yellen in­di­cated that the Fed’s rate hikes could be grad­ual.

“Emerg­ing mar­ket cur­ren­cies have al­ready ben­e­fited from a strong risk ap­petite since Yellen’s speech last week, which was fol­lowed up by the weak CPI data,” Demir added. “Even though the (health­care bill) fail­ure led to a broad-based dol­lar weak­ness, the in­cre­men­tal im­pact on EM cur­ren­cies from this is lim­ited given that they have al­ready ral­lied.”

Higher-yield­ing cur­ren­cies in Asia were among the ben­e­fi­cia­ries, with the Thai baht hit­ting a two-year high and the South Korean won gain­ing 0.3 per­cent to touch a one-month high. China’s yuan also firmed for the sev­enth straight ses­sion.

Both the South African rand and Turk­ish lira held near twoweek highs. On Mon­day Turkey ex­tended emer­gency rule for another three months, al­most a year af­ter it was im­posed in the wake of last July’s failed mil­i­tary coup.

The Hun­gar­ian forint was steady against the euro, ahead of a cen­tral bank meet­ing at which it is ex­pected to keep rates on hold at record lows of 0.9 per­cent.

The In­ter­na­tional Bank of Azer­bai­jan, the coun­try’s big­gest state-run bank, will an­nounce full vot­ing re­sults from cred­i­tors on its pro­posed $3.3 bil­lion (R42.81bn) debt re­struc­tur­ing af­ter a claimants’ meet­ing later in the day.

Mean­while Pres­i­dent Trump has threat­ened “strong and swift eco­nomic ac­tions” if Venezuela goes ahead with plans to cre­ate a Con­stituent As­sem­bly with pow­ers to re­write the con­sti­tu­tion and an­nul the op­po­si­tion-led leg­is­la­ture.

“With FX re­serves be­low $10bn for the first time since 2002 and the econ­omy fall­ing fur­ther into an abyss, it is only trade part­ners who can have a say now,” Si­mon Qui­jano-Evans, an emerg­ing mar­kets strate­gist at Le­gal & Gen­eral In­vest­ment

PHOTO: AP

The dol­lar traded at 10-month lows yes­ter­day af­ter the col­lapse of a key US health care bill which raised doubts about Pres­i­dent Don­ald Trump’s re­form agenda.

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