EM shares gain on improved data
Reassuring Chinese data and a weak dollar kept emerging market stocks near three-year highs yesterday, though Venezuelan bonds slid to their lowest in over a year as rising political tensions and sanctions by the United States fanned default fears.
MSCI’s emerging equity benchmark extended its near 25 per cent rise this year, as Chinese blue chip stocks hit a 19-month high and stronger oil prices gave Russian shares their biggest gain in two weeks.
China’s manufacturing picked up pace in July, a private survey showed, as output and new orders rose at the fastest pace since February on strong export sales.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 51.1 in July, above the 50-point mark that separates growth from contraction, and well above June’s 50.4 level that was also the forecast for the latest reading. The Chinese yuan had hit 10-month highs in both onshore and offshore trade overnight after the factory data and after a top central banker said the central bank would continue to force financial firms to cut debt.
In central and eastern Europe there were also gains for Hungary, the Czech Republic and Romania’s bourses as their biggest export market, the euro zone, reported strong manufacturing PMI figures. Polish stocks lagged, however, having jumped on Monday and as the prospect of legal action by the European Union against Warsaw for the government’s bid for powers to hire and fire top judges simmered in the background.
In bond markets, investors remained firmly focused on Venezuela after the US slapped sanctions on president Nicolas Maduro following the controversial creation of an all-powerful legislative body.
The sovereign 2038 benchmark issue lost almost one cent for a second day running and bonds from state oil firm PDVSA fell across the curve again.
Indian shares ended largely flat as investors booked profits in lenders amid caution ahead of a widely-anticipated interest rate cut at the central bank’s policy meet today.
Indian factory activity plunged in July to its lowest since February 2009, after prime minister Narendra Modi’s new tax policy severely hurt output and demand.