September 19, 2018 / 8:58 AM / 2 months ago

EMERGING MARKETS-Emerging stocks rally for second day, FX firmer

LONDON, Sept 19 (Reuters) - Emerging stocks rose for a second day on Wednesday as investors bet on further stimulus from Beijing to cushion the impact of another round of trade tariffs, while the beaten-down rand and Turkish lira firmed.

The protracted trade dispute between China and the United States ratcheted up again this week as China levied tariffs on about $60 billion worth of U.S. goods in retaliation for the latest round of U.S. tariffs on Chinese products.

MSCI’s benchmark emerging stocks index rose 0.8 percent, building on Tuesday’s 0.3 percent gain, on hopes China will unleash more stimulus to try to limit the economic damage from U.S. tariffs.

“The tariffs were expected and August was a very negative month for emerging markets, so investors had adjusted their positions to be quite defensive,” said Koon Chow, an emerging markets strategist at UBP.

“These investors have used the announcements as an opportunity to buy back some markets they felt had been unfairly punished.”

Chinese mainland shares rose 1.3 percent to two-week highs and Hong Kong stocks gained 1.2 percent. The yuan also edged up after China pledged not to engage in competitive currency devaluation.

With the dollar index easing 0.3 percent to around six-week lows, emerging currencies were mainly firmer, with South Africa’s rand up 1.1 percent.

South Africa’s consumer inflation slowed to 4.9 percent year-on-year in August and the central bank is expected to leave rates unchanged at its meeting on Thursday.

But Maarten-Jan Bakkum, a senior strategist at NN Investment Partners, said he would not be surprised if the bank did raise rates.

“There have been some rumours they might hike - they have not really flagged that themselves but we know from the past that they can surprise. They are not scared to do that if they feel it is necessary,” he said.

Russia’s rouble firmed 0.5 percent and Kazakhstan’s tenge jumped 1.7 percent, helped by oil prices heading back above $79 a barrel.

Even the Turkish lira, which has underperformed in recent days, firmed 0.7 percent as investors awaited the government’s medium term plan, due out on Thursday.

Chow said he wanted to see the government working on the assumption of persistent high inflation and low growth over the next few years, and making some contingency plans for potential defaults.

“I wouldn’t like to see a repeat of the previous plans – chiefly, expectations of previous fast growth and very strong capex,” he added.

Turkish stocks rose 0.8 percent and the banking sector gained 1 percent, continuing its recovery after falling 2.4 percent on Monday.

In emerging Europe, Hungary’s forint firmed 0.1 percent against the euro, testing four-week highs after the central bank tweaked its policy tools on Tuesday, saying it was preparing for a future “gradual and cautious” normalisation of its loose monetary policy.

For a GRAPHIC on FX performance 2018, see: tmsnrt.rs/2egbfVh

For TOP NEWS across emerging markets

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

on year

Morgan Stanley Emrg Mkt Indx 1027.43 +7.69 +0.75 -11.31

Czech Rep 1094.09 +2.45 +0.22 +1.48

Poland 2222.64 -8.40 -0.38 -9.69

Hungary 35969.76 -141.13 -0.39 -8.65

Romania 8307.81 +20.83 +0.25 +7.15

Greece 691.89 +5.21 +0.76 -13.77

Russia 1133.89 +10.86 +0.97 -1.78

South Africa 49987.54 -232.23 -0.46 -4.85

Turkey 95705.18 +818.31 +0.86 -17.02

China 2730.85 +30.90 +1.14 -17.43

India 37330.71 +40.04 +0.11 +9.61

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2018

Czech Rep 25.43 25.42 -0.01 +0.39

Poland 4.29 4.29 -0.05 -2.67

Hungary 323.20 323.63 +0.13 -3.92

Romania 4.65 4.64 -0.13 +0.58

Serbia 118.20 118.21 +0.01 +0.17

Russia 66.92 67.29 +0.55 -13.84

Kazakhstan 360.97 367.07 +1.69 -7.80

Ukraine 28.10 28.15 +0.18 +0.16

South Africa 14.70 14.90 +1.33 -15.95

Kenya 100.70 100.70 +0.00 +2.38

Israel 3.59 3.59 +0.00 -3.04

Turkey 6.29 6.37 +1.21 -39.78

China 6.85 6.86 +0.14 -5.01

India 72.65 72.70 +0.07 -12.14

Brazil 4.16 4.16 +0.00 -20.37

Mexico 18.74 18.81 +0.38 +4.87

Debt Index Strip Spd Chg %Rtn Index

Sov’gn Debt EMBIG 379 -2 .05 7 68.16 1

Reporting by Claire Milhench Editing by Andrew Heavens

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