Emerging markets on a roll
EMERGING stocks scaled a more than six-year peak yesterday, thanks to a tepid dollar and numbers showing the global economy was expanding at a healthy clip.
Turkish inflation data showed little sign of pressure on policymakers’ easing.
With world stocks edging to another record high, MSCI’s emerging market benchmark index advanced 0.6 percent to trade at its strongest since May 2011.
Bourses in Turkey and the Philippines romped to fresh historic records, while Chinese blue chips gained for the fourth session running. Thailand stocks traded at their strongest in 24 years while Hong Kong rose to a decade high and Russian dollar-stocks jumped more than 1 percent to their highest in 11 months.
Markets were buoyed by Tuesday’s data showing healthy growth numbers across developed and emerging economies, which also gave a tailwind to commodities.
Adding to the emerging cheer was the dollar languishing close to the more than three months trough hit yesterday.
“The dollar is trading on a fairly weak footing at the moment which tends to be supportive for emerging markets, especially those with significant dollar debt like some of the Asian countries, but also Turkey and South Africa,” said Jakob Christensen, EM research head at Danske Bank.
The rand strengthened 0.7 percent, wiping out the previous day’s losses, while Russia’s rouble added 0.3 percent supported by Brent oil futures trading firmly above $66.
Turkey’s lira strengthened 0.1 percent as data showed consumer prices rising 11.92 percent in December, exceeding expectations and coming in sharply above a government forecast, yet off the 14-year peak it had hit in November.
High inflation is one of the biggest challenges facing the Turkish economy, which has grown strongly after a short-lived downturn following a failed coup in July 2016.
“For the market it’s important to see what it will mean for the central bank – do they have to react again? The market is probably taking the view that there will be higher rates,” said Christensen.