| LONDON, Sept 19
LONDON, Sept 19 Emerging stocks rose 1.3 percent
on Monday and currencies firmed on a bet the U.S. Federal
Reserve will not raise interest rates this week, with Hungarian
assets driven higher by a ratings promotion to investment grade.
MSCI's index hit one-week highs, shrugging off
Friday's rise in U.S. yields and tracking gains on developed
bourses and in oil prices. Markets price in just a 12 percent
chance of a rate rise at the two-day Fed meeting concluding on
However, there are concerns the Bank of Japan will prove
less aggressive in its commitment to further monetary stimulus
at its meeting, also on Tuesday and Wednesday.
"The environment is and will remain supportive for emerging
assets," HSBC strategist Murat Toprak said.
Aside from the Fed, Toprak cited stabilisation in commodity
prices and better economic data from China.
"From time to time the market gets worried about an earlier
move from the Fed so it has an impact but we have to trade
through the noise," he added.
Emerging sovereign dollar bond spreads have reacted however
to the recent rise in 10-year Treasury yields, with average
yield spreads at the widest in a month at around 347 basis
points (bps). The index was unchanged on Monday.
A quarter percent pullback in the dollar index from two-week
highs lifted emerging currencies, with some Asian ones
rebounding as their markets re-opened after holidays at the end
of last week. The rand firmed almost 1 percent to 10-day highs.
In emerging Europe, the Hungarian forint touched a six-month
highs to the euro and yields fell between five and 12
bps across the curve, reacting to S&P Global's announcement late
on Friday it was raising Hungary's credit rating to BBB-, the
lowest investment grade rung.
The promotion makes Hungary, whose central bank meets on
Tuesday, eligible for inflows from funds that can only invest in
investment grade-rated countries.
Hungarian stocks, already among the best performing this
year in emerging markets, jumped 1.8 percent to nine-year highs
. With Hungarian 10-year bonds offering a 3 percent yield
versus zero in Germany, analysts said the upgrade may pose a
dilemma for authorities if inflows spur forint appreciation.
"Given the central bank is against a strong currency, we may
hear verbal intervention from officials should a wave of capital
outflows fuel forint gains against the euro," Rabobank analysts
Interest rates are expected to be held steady at Tuesday's
monetary policy meeting in Budapest, but the central bank may
cut the maximum amount that banks can hold in three-month
deposits further to 1 trillion forints as part of efforts to
stimulate lending and growth, a Reuters poll predicted.
Russian assets benefited from oil price gains and S&P's
decision to raise the outlook on its credit rating to stable.
The rouble also derived support from the central bank's hawkish
tone on Friday when it cut rates by half a percent but warned
that no more easing was likely this year.
Russian 10-year yields rose above 8.2 percent after the
hawkish message and on Monday stood well above recent 2-1/2-year
highs at around 7.92 percent. The rouble firmed 0.4
Renaissance Capital analyst Oleg Kouzmin praised the bank
for clarifying its commitment to a 4 percent end-2017 inflation
"For real-money investors buying the disinflation story,
this is a good thing," he said. "It's additional confirmation
the central bank has become one of the most credible stories in
For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 897.31 +11.86 +1.34 +12.99
Czech Rep 860.03 -0.78 -0.09 -10.07
Poland 1753.24 +18.98 +1.09 -5.70
Hungary 28583.85 +486.19 +1.73 +19.49
Romania 6975.02 -4.13 -0.06 -0.42
Greece 562.63 +3.13 +0.56 -10.88
Russia 964.58 +3.17 +0.33 +27.41
South Africa 45437.73 +7.35 +0.02 -0.79
Turkey 76993.50 +973.21 +1.28 +7.34
China 3026.61 +23.77 +0.79 -14.48
India 28674.28 +75.25 +0.26 +9.79
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.01 27.01 +0.01 -0.04
Poland 4.30 4.31 +0.11 -1.08
Hungary 307.70 307.80 +0.03 +2.26
Romania 4.44 4.45 +0.07 +1.70
Serbia 123.00 123.08 +0.07 -1.24
Russia 64.85 65.14 +0.45 +12.49
Kazakhstan 339.40 339.80 +0.12 +0.32
Ukraine 25.73 25.80 +0.27 -6.91
South Africa 14.08 14.17 +0.66 +9.84
Kenya 101.20 101.20 +0.00 +0.99
Israel 3.77 3.77 -0.08 +3.06
Turkey 2.97 2.98 +0.17 -1.95
China 6.67 6.67 -0.00 -2.68
India 66.94 67.07 +0.19 -1.10
Brazil 3.26 3.26 -0.05 +21.34
Mexico 19.54 19.60 +0.30 -12.12
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 371 0 .02 7 59.50 1
(Additional reporting by Claire Milhench and Karin Strohecker;
editing by John Stonestreet)