Emerging equities retreat from highs

30/04/2015 00:33 AST

Emerging stocks retreated from 7-1/2 month highs yesterday with investors looking to the US Federal Reserve for inspiration ahead of a monetary policy statement due later.

MSCI emerging stocks fell 0.6%, taking a breather after six straight days of gains that took the index to its highest level since last September. Emerging assets have recently surged as fears have receded of an imminent US rate rise and expectations are growing of additional Chinese stimulus.

Analysts said some investors are now starting to wonder whether the rally was overblown though a dovish statement from the Fed is likely to lure many back into emerging markets. “We had 48 hours of a strong dollar/emerging market retracement and now hours before US GDP data and the FOMC (Federal Open Market Committee), there has been a lot of reshuffling of positions,” said Luis Costa, a senior emerging market debt and foreign exchange strategist at Citi. “If US data doesn’t improve, markets will be inclined to throw the towel in on dollar longs, we may erase the possibility of a Fed rate hike this year and that will boost risky assets.”

Elsewhere, Poland became the first emerging economy to issue external debt at negative yields. It sold 580mn Swiss franc zero coupon three-year note at a yield of minus 0.213%, a reflection of the abundant liquidity on world markets as many central banks expand bond-buying programmes.

The zloty pulled back 0.2% against the euro.


Reuters

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