Promising gains for emerging markets

LONDON: Emerging markets confirmed their strong start to the year with stocks racking up their best January in six years and currencies chalking up solid gains as markets awaited monetary policy signals from the US Federal Reserve Bank this week.

Gains in heavyweight bourses Hong Kong and Taiwan lifted MSCI’S emerging markets equity benchmark 8% since the start of the year, the best monthly rise since March 2016 and its best January since 2012.

Equities around the globe had a strong start to the year with Wall Street hitting a succession of record peaks, though a rise in global bond yields sent jitters through some markets.

A normalisation of US monetary policy with higher US yields would raise the pressure, but the overall picture for emerging markets remained positive, said NN Investment Partners.

“Prospects for global economic growth are robust, with the synchronised upturn in both developed and emerging markets set to continue, which will fuel global trade growth,” NN IP analysts wrote in a note to clients.

The Federal Reserve concluded its first 2018 meeting this week and last under outgoing chair Janet Yellen.

Much focus was also on

China, where data showed that manufacturing growth in the world’s second-largest economy had slowed more than expected to an eightmonth low due to a cooling property market and tighter pollution rules.

“The breakdown shows a broad softening in demand – the indices for output, new orders and imports all declined,” Capital Economics’ Julian Evans-pritchard wrote.

“The new export orders index looks particularly weak… raising questions about the strength of foreign demand.”

Mexico’s peso put on one of the best monthly performances. The peso looked on track to strengthen 5% in January with investors looking more optimistically at the outcome of North American Free Trade Agreement talks after the US trade chief pledged to seek “breakthroughs” by late February, easing concerns that Washington would soon withdraw from the trilateral pact.

South Africa’s rand enjoyed a third straight month of gains, looking to add nearly 4%, while China’s yuan and Russia’s rouble were not far behind.

Turkey’s lira eyed a 0.5% monthly gain despite January being marred by the latest tensions with Washington following Ankara’s engagement in Syria.

Latest Turkey December data showed the country’s trade deficit had widened again. However, tourism revenue numbers – one of Turkey’s major sources of financing for its current account deficit – showed an 18.9% jump in 2017, helped by a fivefold surge in the number of Russians visiting the country. – Reuters