January 19, 2018 / 10:20 AM / 8 months ago

EMERGING MARKETS-Emerging stocks set for 6th week of gains, yuan at 2-yr high

LONDON, Jan 19 (Reuters) - Emerging stocks pushed to a fresh near-decade high and were set for a sixth straight week of gains on Friday after Chinese growth data lifted Asian markets to a record peak and the yuan to a two-year high.

MSCI’s benchmark emerging stocks index rose 0.4 percent, on course to end the week more than 2 percent stronger. MSCI’s broadest index of Asian shares outside Japan climbed 0.6 percent to an all-time peak.

Investor sentiment is being underpinned by improved corporate earnings and economic expansion in both developed and emerging markets, while oil prices have steadied at over $68 a barrel, helping crude exporters.

The rosy picture was cemented by data from China on Thursday that showed the world’s second-largest economy grew faster than expected in the fourth quarter, and achieved its first annual acceleration in growth in seven years.

The numbers gave an extra kick to Asian markets, with Hong Kong stocks up 0.4 percent to record highs, after surging 2.7 percent in the week. China mainland shares hit fresh two-year highs with a weekly gain of 1.7 percent. Heavyweight Taiwan rose 0.7 percent, up 2.5 percent for the week.

Meanwhile investors were left unfazed by U.S. Treasury yields continuing their upward march to hit their highest levels since September 2014.

“The key ingredient for emerging markets is growth,” said Paul Fage, senior emerging markets strategist at TD Securities. “If you have the underlying growth story, markets can ride through Fed interest rate hikes - especially in an environment with dollar weakness.”

The dollar index was languishing near a three-year low over fears of a U.S. government shutdown but emerging currencies delivered a mixed performance after some made strong gains in the week.

The yuan breached the psychologically important 6.4 dollar level for the first time in more than two years.

SOUTH AFRICAN RISK

The South African rand hit a fresh 2-1/2-year high in early trading before sliding back, but was still on course for a weekly gain of about 1.6 percent.

South Africa’s central bank held rates at 6.75 percent on Thursday as expected, seeing upside inflation risks despite the recent strengthening of the rand.

The rand has gained more than 13 percent against the dollar since the bank’s Nov. 23 meeting, lifted largely by Cyril Ramaphosa’s election as leader of the ruling African National Congress (ANC) in December.

Fage said the market was now focusing on when President Jacob Zuma might go and on the February budget, following a poor set of data in the October statement.

“These are the risk factors which are still lurking around in the rand, and if you wave a magic wand and make it all vanish, then we think you could see USD-ZAR going lower from here. But right now, we think it is a bit stretched given these risks,” he said.

Turkey’s lira also fell 0.2 percent and was on course for a weekly loss. Fage said political risks were weighing on the lira, with Turkey and the United States at loggerheads over Washington’s plans for Syria.

Turkey’s central bank kept its late liquidity window rate on hold at 12.75 percent on Thursday, saying it would stick with its tight policy stance until inflation improves.

Elsewhere in emerging Europe, the Hungarian forint led the losses, slipping 0.3 percent against the euro from three-month highs. The Hungarian central bank held its first interest rate swaps auction on Thursday, part of a package of unconventional easing measures.

The Czech crown fell 0.25 percent against the euro as Prime Minister Andrej Babis rushed to form a new government. Babis’s minority cabinet lost a parliamentary confidence vote this week.

In Africa, Nigerian stocks were set to end the week up 4 percent after hitting a nine-year high on Thursday. The country's lower house of parliament has passed a landmark oil reform bill which aims to increase transparency and stimulate growth in the industry. 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) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 1233.18 +5.66 +0.46 +6.45

Czech Rep 1120.35 +1.30 +0.12 +3.91

Poland 2601.32 +10.10 +0.39 +5.69

Hungary 39790.78 +126.86 +0.32 +1.05

Romania 8365.40 -9.27 -0.11 +7.89

Greece 842.88 +5.32 +0.64 +5.05

Russia 1274.85 -4.43 -0.35 +10.43

South Africa 53990.77 -19.72 -0.04 +2.77

Turkey 16094.66 -761.36 -0.65 +0.66

China 3489.11 +14.35 +0.41 +5.50

India 35467.51 +207.22 +0.59 +4.14

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2018

Czech Rep 25.42 25.35 -0.26 +0.44

Poland 4.17 4.16 -0.24 +0.11

Hungary 308.96 308.05 -0.29 +0.51

Romania 4.66 4.65 -0.16 +0.41

Serbia 118.43 118.35 -0.07 -0.03

Russia 56.56 56.49 -0.12 +1.95

Kazakhstan 324.66 324.46 -0.06 +2.51

Ukraine 28.86 28.79 -0.24 -2.48

South Africa 12.17 12.13 -0.37 +1.52

Kenya 102.75 102.80 +0.05 +0.34

Israel 3.40 3.42 +0.36 +2.18

Turkey 3.78 3.77 -0.18 +0.34

China 6.40 6.42 +0.33 +1.72

India 63.74 63.86 +0.20 +0.15

Brazil 3.21 3.21 -0.00 +3.30

Mexico 18.60 18.60 -0.00 +5.62

Debt Index Strip Spd Chg %Rtn Index

Sov’gn Debt EMBIG 292 -1 .03 8 08.32 1

Reporting by Claire Milhench; additional reporting and graphic by Karin Strohecker; Editing by Gareth Jones

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