09/11/2017 14:31 AST
Emerging equities extended gains on Thursday, flirting with fresh six-year highs after encouraging Chinese inflation data, while the Czech crown leapt against the euro to a four-year high on rate hike expectations.
China’s producer prices were surprisingly strong in October, while consumer inflation picked up pace, suggesting economic momentum remained robust and easing market concerns of a slowdown in the world’s second largest economy.
Chinese mainland blue-chip stocks scaled a fresh two-year high, up 0.7 percent, and Hong Kong stocks rose 0.8 percent to another decade-peak.
“Stocks are getting some support from positive sentiment on the growth outlook,” said Per Hammarlund, chief emerging markets strategist at SEB. “The fact that Chinese CPI came in a bit stronger indicates demand is still pretty strong and that suggests growth will stay pretty healthy.”
In emerging Europe, Czech inflation also hit a five-year high, bolstering expectations of a rate rise and sending the Czech crown surging to its strongest against the euro since October 2013, up 0.3 percent.
But Hungary’s forint eased 0.2 percent to a one-month low as October inflation was lower than expected, underpinning the Hungarian central bank’s monetary loosening policy.
MSCI’s benchmark emerging stocks index eked out gains of 0.1 percent, with Czech shares up 0.4 percent and Hungary up 0.3 percent.
Bourses across the Gulf broadly steadied after sustaining losses in recent days following Saudi Arabia’s anti-corruption drive. But the main Saudi index was down 0.2 percent.
In a fresh sign that the probe may affect asset flows beyond Saudi Arabia’s borders, the UAE central bank and securities regulator have reportedly asked banks in the country to provide information on the accounts of 19 Saudi citizens.
“This geopolitical risk could weigh on emerging market credit in general for some time and slow down some of the strong inflows we have seen over the last few months,” said Trieu Pham, a strategist at MUFG.
Saudi sovereign dollar bonds were slightly higher on the day, and five-year credit default swaps retreated 2 basis points (bps) from Wednesday’s close to 97 bps.
Meanwhile emerging currencies continued to struggle against the dollar following a sharp broad-based sell off earlier in the week, despite the greenback trading lower against a basket of currencies.
The Russian rouble, South African rand and Mexican peso all traded flat or slightly lower against the dollar, with the Turkish lira the only one to buck the trend, rising 0.2 percent.
“I think we have seen the bulk of the sell-off in the lira assuming the political tensions don’t get worse,” said Phoenix Kalen, a strategist at Societe Generale. “Right now the threats that are hanging over Turkey are really serious.”
The United States has partially started to reissue visas in Turkey, but tensions continue to fester, with a trial against Reza Zarrab, a wealthy Turkish-Iranian gold trader, due to start in the U.S. this month.
The dollar bonds of Venezuela and its state oil firm PDVSA were mainly trading lower despite reports that PDVSA has transferred most of the funds to make the delayed final payment on its 2017N bond.
Investors have asked trade body ISDA if the delay constitutes a credit event, which would trigger a payment on credit default swaps.
Reuters
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