Emerging equities snap 4-day winning streak

02/05/2015 09:52 AST

Emerging market stocks snapped a four-week winning streak to end the week in the red, while many currencies strengthened yesterday against the dollar. The MSCI emerging equity index was marginally weaker on the day and was set to chalk up the steepest weekly losses since mid-March, down more than 1%.

That was after weak corporate earnings dented sentiment on Wall Street and data showed China’s manufacturing sector barely grew in April. There was little liquidity, with stock markets in Russia, Turkey and across many eastern European countries shut for a holiday.

For April as a whole, the index showed its biggest monthly gain in more than three years, led by Chinese stocks which surged almost 20%. “Risk appetite remains firm, volatility is declining and commodity prices have rebounded,” Barclays wrote in a note to clients.

“Pressures on the dollar are intensifying, even though the Fed did not sound particularly dovish this week and remains on track for a September rate hike, helping US yields move higher.”

Yet fund flows show plenty of investors remain skeptical. EPFR data recorded a second straight week of outflows from the emerging equity funds it tracks, with year-to-date redemptions amounting to $24.3bn. The flow picture looked rosier for some countries, with dedicated Russia equity funds recording inflows for the 12th time in the past 14 weeks, while inflows into Greek equity funds are at a 10-week high, EPFR said. On currency markets, the South African rand, the Turkish lira and the Russian rouble all strengthened around 0.2% in thin offshore trade, as the dollar index was flat after suffering its worst monthly performance in four years in April.

Reuters