| LONDON, Sept 28
LONDON, Sept 28 Emerging equities rose on Friday
and were on track for their biggest monthly gain since January
while South African assets firmed modestly on after being
knocked lower by a one-notch credit ratings downgrade in the
Markets everywhere have been buoyed by expectations that
Spain's tough budget is a prelude to an EU programme that will
allow the European Central Bank to buy its bonds.
Chinese shares gained more than 1 percent as hopes for
stimulus gathered pace while MSCI's emerging equity
index jumped 0.7 percent. The index is up more than 6
percent in September, the biggest monthly gain since January.
The market is up 7.2 percent on the quarter, recouping most
of the last quarter's 10 percent losses, thanks to the ECB's
pledges on the euro and the U.S. Federal Reserve's decision to
embark on open-ended $40 billion a month asset buying.
South Africa's equity index rose 0.3 percent
shrugging off the Moody's action which was mostly priced in
after two other agencies cut the rating earlier this year.
Credit default swaps eased slightly to 151 basis points.
The rand and bonds which weakened after the downgrade,
recovered slightly, with the latter benefiting from their
debut into Citi's prestigious World Government Bond Index.
South African bonds have taken in over $7 billion in foreign
flows since mid-April when their eligibility for the index was
announced and analysts reckon the market will be supported in
coming weeks by flows from funds that track the WGBI.
"WGBI entry and Moody's downgrade news both vie for market
flows and sentiment," Barclays said in a note.
It added separately: "We are concerned about the ...response
once excitement about WGBI inclusion wanes and market
participants assume related inflows have entered the market."
In Europe, Russian stocks rose 1 percent as oil rose
though Warsaw and Budapest were flat. MSCI's emerging Europe
index is up 8 percent this quarter
The Czech crown fell 0.5 percent to new six-week
lows a day after the central bank cut rates to a record low and
signalled it would weaken the currency [ID:ID:nL5E8KQ95C].
"Yesterday's meeting should remove any doubt that the
central bank will do anything it can to prevent a strengthening
of the crown," ING analyst Simon Quijano-Evans said.
Poland's zloty rose 0.3 percent to a two-week high to the
euro but Hungary's forint gave up early
gains fuelled by stronger-than-expected data. [ID:ID:nB3E8CB053]
In Asia, the Chinese yuan rose to its strongest level since
the landmark currency de-pegging of July 2005.
The Indian rupee firmed 0.6 percent to rise into positive
territory for 2012.
Emerging sovereign dollar bonds saw spreads tighten
8 bps to 301 bps over Treasuries. Spreads have contracted more
than 70 bps this past quarter thanks to strong inflows.
(Reporting by Sujata Rao)