March 3, 2020 / 10:18 AM / a month ago

EMERGING MARKETS-EM stocks rise; all eyes on G7 coronavirus statement

* MSCI’s index of EM shares rise 1%

* EM currencies decline against strong dollar

* Turkish inflation rises less than expected in Feb

* S.African rand weakens 1.3%; data shows economy in recession

* Malaysian cenbank cuts rates; ringgit steady

By Susan Mathew

March 3 (Reuters) - Emerging market stocks extended their gains on Tuesday amid rising hopes of policy support, with the G7 group holding a call to discuss measures to combat economic damages from the coronavirus outbreak.

Finance ministers from G7 countries and central bank governors are to hold a conference call on Tuesday (1200 GMT).

However, a G7 official told Reuters on Tuesday that a statement being drafted so far excludes direct calls for new government spending or coordinated central bank rate cuts.

After a steep sell-off last week, markets worldwide rose on commentary from officials of major central banks that raised hopes of a coordinated move to support markets as the coronavirus speeds across the globe.

Emerging market stocks across the board were comfortably in the black, taking MSCI’s index of developing market stocks up 1%, after a bumper session on Wall Street overnight.

“The market is probably expecting a generic communique that central banks and finance ministers are going to working closely together and closely monitor developments,” said Chris Turner, head of EMEA and LATAM research at ING.

“And that needs to be the case, particularly from the U.S. Federal Reserve because there are high expectations for a 50 basis point cut by the Fed. If they delay, U.S. equity markets will start to weaken and it will start to impact risk assets.”

Currencies of emerging market currencies lost ground against a stronger dollar.

South Africa’s rand deepened losses, giving back Monday’s gains after GDP data showed the economy contracted more than expected in the fourth quarter, entering a recession.

The Turkish lira fell 0.7% to resume its slide - down for the sixth session in seven. Data on Tuesday showed inflation rose less than expected to 12.37% year-on-year in February, climbing for the fourth straight month.

If inflation continues to climb and the lira continues to slide in the face of the conflict in Syria and the global coronavirus spread, analysts say further monetary easing could be halted.

Investors are a bit fearful to jump back into high-yielding EM currencies even as Fed rate-cut probabilities rise, as fresh news regarding the spread of the virus may come in and upset equities at any point, ING’s Turner said.

In Malaysia, the central bank cut its benchmark interest rate by 25 basis points to 2.5% to help cushion the impact from the virus outbreak to its exports and tourism. The ringgit steadied.

This is the bank’s second rate cut this year and comes after a week of political turmoil in which Muhyiddin Yassin took over as prime minister following the surprise resignation of Mahathir Mohamad.

India’s rupee hit a near 16-month low, extending Monday’s slide after the country reported more coronavirus cases, taking the tally to six.

For GRAPHIC on emerging market FX performance 2020, see For GRAPHIC on MSCI emerging index performance 2020, see

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Maju Samuel)

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