Emerg­ing mar­kets hit 19-month high

Driv­ers in­clude sub­dued global bond yields and bet­ter growth prospects

The Star Late Edition - - COMPANIES - Marc Jones

EMERG­ING-mar­ket stocks hit a 19-month high yes­ter­day, with even hints of loom­ing rate hikes in the US and the dol­lar’s longest un­bro­ken rise since 2012 un­able to knock them off their stride.

The Mor­gan Stanley Cap­i­tal In­ter­na­tional’s 26-coun­try emerg­ing-mar­ket eq­uity in­dex hit its lat­est peak thanks to its ninth climb in the past 11 days, tak­ing its gain since the end of De­cem­ber to al­most 12 per­cent.

Many of the big emerg­ing-mar­ket cur­ren­cies and bond mar­kets also con­tin­ued to shine. The rand rose 0.7 per­cent to go un­der 13 per dol­lar for the first time since Oc­to­ber 2015, while Rus­sia’s rou­ble was up, just about, for a tenth day in the past 11 days and at its high­est since July 2015.

Aberdeen As­set Man­age­ment’s Kevin Daly said the across-the-board strong per­for­mances were down to a “goldilocks” com­bi­na­tion of fac­tors, in­clud­ing broadly sub­dued global bond yields, in­fla­tion and im­prov­ing growth.

“If you add it up, it’s a pretty strong back­drop for higher-yield­ing emerg­ing-mar­ket as­sets,” Daly said.

“Mar­kets maybe are also pick­ing up on some of the more con­cil­ia­tory com­ments from (US Pres­i­dent Don­ald) Trump on China on the one China pol­icy and that he hasn’t fol­lowed through on the cur­rency-ma­nip­u­la­tion talk.”

Egypt’s pound has been roar­ing too, as in­vestors have swept back in fol­low­ing its de­val­u­a­tion late last year. It climbed 0.3 per­cent on the day, tak­ing its surge over the past cou­ple of week to al­most 17 per­cent.

The up­beat sen­ti­ment also kept the cost of in­sur­ing ex­po­sure to South African and Turk­ish debt pinned near twoyear and five-month lows re- Gain in MSCI emerg­ing-mar­ket eq­uity in­dex since end of De­cem­ber fla­tion slowed to 6.6 per­cent in Jan­uary, weaker than fore­cast, data showed.

Turkey’s fi­nance min­is­ter, Naci Ag­bal, mean­while said its bud­get spend­ing in Jan­uary was in line with tar­gets.

Wil­liam Jack­son, a se­nior emerg­ing-mar­kets econ­o­mist with Cap­i­tal Eco­nom­ics, pointed to the re­cent re­bound in the Turk­ish lira, which has barely budged on the day at 3.65 per dol­lar.

“It might be that the sell-off we saw in Jan­uary caused it to over­shoot, and it has re­couped some of those losses.”

“The cen­tral bank did raise in­ter­est rates – it wasn’t a con­vinc­ingly large rate hike, but it still showed it was able to raise in­ter­est rates. That may have helped to ease some of the mar­ket’s fears,” Jack­son said.

Nige­ria’s re­cently sold bond con­tin­ued to climb.

In cen­tral and eastern Europe, Hun­gary’s stock mar­ket hit its lat­est record high and Czech shares con­tin­ued their strong start to the year. How­ever, shares in Poland took a breather.

Overnight in Asia, there had been mild weak­ness for the re­gion’s cur­ren­cies such as the South Korean won, Thai baht and Philip­pine peso af­ter the dol­lar re­ceived a boost from Fed­eral Re­serve chair Janet Yellen, who said another US rate hike was likely in one of its up­com­ing meet­ings.

In Latin Amer­i­can, how­ever, the Brazil­ian real hit its strong­est level in more than a year and a half, fol­low­ing a rise in cap­i­tal in­flows and af­ter the cen­tral bank re­sumed cur­rency in­ter­ven­tion fol­low­ing a two-week pause.

“The Mex­i­can peso has also been do­ing very well,” Daly said. “It looks like the diplo­macy (with the US) is im­prov­ing a lit­tle.”

The peso is up al­most 9 per­cent since the mid­dle of Jan­uary. – Reuters

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