LONDON Feb 17 Emerging market stocks took a
breather on Friday, easing back after what was set to be a
seventh week of gains in the last eight and also a bumper one
for many of the major EM currencies.
Developing markets have surged since the start of the year
as improving global economic strength and a subdued dollar and
debt costs have given investors encouragement.
MSCI's 23-country emerging market index dipped 0.5
percent on the day but was up a solid 1.1 percent for the week
following gains from Turkey to Poland, to
China, India and Brazil.
It was a similar pattern for currencies. Most were lower for
the day as the dollar rebounded from a 1-week low.
But for the week, South Africa's rand was up 2.7
percent, its best since September. Brazil’s real was set
for its eighth weekly gain on the trot, while a third one for
Russia's rouble means it is now up 40 percent in the last
"Inflation is rising across EM... and the Fed (U.S. central
bank) is not signalling a March rate hike so this is conducive
for emerging market currencies," said ING's Chief EMEA FX and IR
strategist, Petr Krpata.
"The high yielders, the Russian rouble, the South African
rand and Turkish lira are all doing pretty well."
EM bond markets have been rallying hard too. The premium
investors demand to buy the debt of countries such as Brazil
, Russia or Pakistan's
rather that ultra-safe U.S. Treasuries has been sliding fast.
Dovetailing with that, the cost of insuring against a
default has plunged. South African 5-year CDS price levels hit
182.7 bps on Thursday, which was the lowest since Dec 2014.
Turkey, which was in the market's firing line earlier this
year, said on Friday it was studying the foreign currency debts
of its private sector and will introduce new regulatory measures
Deputy Prime Minister Mehmet Simsek said the measures will
include not allowing new forex positions and said that Turkey
was technically not in recession despite its recent subdued
Nerves surrounding the world's largest emerging market,
China, have also been easing.
Its central bank said on Friday it had sold the least amount
of foreign exchange in five months in January, reinforcing views
that capital outflows have eased as policymakers have tightened
controls and as the yuan steadies.
Net foreign exchange sales by the People's Bank of China
(PBOC) amounted to 208.8 billion yuan ($30.42 billion),
according to Reuters calculations. That compared with 317.8
billion yuan in December and 644.54 billion yuan last January.
The Chinese yuan eased 0.2 percent after
companies stocked up on the dollar on Friday, though it was on
course for its best week in more than a month."
"Companies suddenly started purchasing dollars. And traders
had to follow the trend and shored up long dollar positions,"
said one currency dealer in Singapore.
The South Korean won also dipped in Asia after Samsung's
chief was arrested over his alleged role in a corruption
scandal, while the Singapore dollar struggled to gain traction
despite an upward revision to fourth-quarter growth.
For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml
For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see)
(Additional reporting by Claire Milhench; Editing by Toby