Emerg­ing stocks hit 6-yr high fu­elled by dol­lar, growth

Daily Sabah (Turkey) - - Money -

EMERG­ING market stocks sailed to fresh six-year highs yes­ter­day, buoyed by op­ti­mism over global growth and com­pany earn­ings. Cur­ren­cies from emerg­ing economies ben­e­fited from the dol­lar stalling on con­cerns over U.S. Pres­i­dent Don­ald Trump’s tax plan. MSCI’s emerg­ing market in­dex added 0.4 per­cent in its sec­ond straight day of gains, trad­ing at its high­est level since Au­gust 2011 as Asian heavy­weights tracked the global rally that saw Wall Street scal­ing all-time highs on Tues­day.

South Korea’s KOSPI in­dex added 1 per­cent to close at record highs as ex­pec­ta­tions for ro­bust third-quar­ter earn­ings from cor­po­rates such as Sam­sung Elec­tron­ics boosted market sen­ti­ment. Tai­wan stocks matched those gains. In­vestors risk ap­petite was whet­ted after the In­ter­na­tional Mone­tary Fund (IMF) raised its out­look for the global econ­omy, in­di­cat­ing the cur­rent broad-based global eco­nomic up­swing will likely be sus­tained this year and next.

The IMF up­graded its global growth fore­cast for 2017 by 0.1 per­cent­age points to 3.6 per­cent and to 3.7 per­cent for 2018, driven by a pickup in trade, in­vest­ment and con­sumer con­fi­dence.

Turkey got one of the big­gest up­grades after a stronger-than ex­pected per­for­mance at the start of the year. “The IMF dou­bled its 2017 GDP growth fore­cast to 5.1 per­cent - raises 2018 to 3.5 per­cent,” Si­mon Qui­janoE­vans, emerg­ing market strate­gist at Le­gal & Gen­eral In­vest­ment Man­age­ment wrote in a note to clients. “That should re­move a lot of the doubts.” Turkey’s lira strength­ened 0.9 per­cent against the dol­lar.

But cur­ren­cies broadly firmed against the weaker dol­lar as Trump’s es­ca­lat­ing war of words with Repub­li­can Se­na­tor Bob Corker raised con­cerns about the ad­min­is­tra­tion’s abil­ity to pass promised re­forms.

South Africa’s rand strength­ened 1 per­cent in a sec­ond day of gains while Rus­sia’s rou­ble edged 0.1 per­cent higher. How­ever, China’s yuan eased against the dol­lary, as cor­po­rate de­mand for the green­back outweighed a much stronger of­fi­cial fix. Not ev­ery­one is con­vinced the sec­tor’s dif­fi­cul­ties are past. Emerg­ing lo­cal debt yields rose on Mon­day to the high­est since Au­gust though they have clawed back some gains since.

“Cur­ren­cies ... have been a bit wob­bly since the end of last week though the dol­lar is re­treat­ing a bit now,” said Rob Dri­jkonin­gen, head of emerg­ing market debt at Neu­berger Ber­man. He noted the ex­pec­ta­tions of tax re­form and a De­cem­ber rate rise had boosted U.S. Trea­sury yields. “Then there is also quite high po­si­tion­ing in EM by hedge funds and short-term play­ers so all that is com­ing to­gether to add to pres­sure on EM,” Dri­jkonin­gen added.

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