LONDON, Dec 21 (Reuters) - Kazakhstan’s dollar bonds extended losses on Thursday, having fallen sharply the previous day after news that $22 billion in assets of a state investment fund had been frozen, while broader emerging assets were flat, tracking developed peers.
The passage of the U.S. tax cuts bill was something of an anti-climax for world stocks which have already hit successive record highs, and MSCI’s emerging equities index slipped 0.2 percent, ending three days of gains .
The tax cuts, which will add to U.S. debt levels in the longer run, have also pushed up Treasury and global bond yields, pressuring equity and emerging markets.
“(Emerging markets) have been positive on the growth outlook for the U.S. and the tax package and now it is pretty much priced in,” said Per Hammarlund, chief emerging markets strategist at SEB.
Kazakh dollar bonds slipped as much as a quarter cent across the curve after sharper falls late on Wednesday when sources said the Bank of New York Mellon had frozen assets of Kazakhstan’s National Fund over a lawsuit launched by Moldovan businessman Anatolie Stati against the Kazakh government.
A British court will hear the case today.
Bonds maturing 2025 were just off one-month lows while a 2045 issue was trading near 10-day lows , according to Tradeweb. The Kazakh tenge firmed against the dollar, though the central bank said it had not intervened to support it.
Simon Quijano-Evans, a strategist at L&G Investment Management, attributed the muted market reaction to thin pre-Christmas liquidity. But he called the development “unprecedented”.
“Theoretically it’s a national institution so it should cause a rethink for central banks and sovereign wealth funds as it’s been assumed so far that these assets were relatively immune,” Quijano-Evans said.
In another court case, Ukraine’s nationalized PrivatBank on Wednesday got a UK court to freeze the assets of two former shareholders. Ukraine sovereign dollar bonds were slightly weaker across the curve according to Tradeweb.
Most emerging currencies were weaker against the dollar, though the rouble firmed to three-week highs amid end-month tax payments and the Indonesian rupiah rose to two-week highs after Fitch upgraded the sovereign’s rating to BBB, on a par with Italy.
Indonesian shares hit record highs.
Czech interest rates are seen on hold after two hikes since August but crown traders will be watching whether the central bank maintains its hawkish rhetoric. The currency slipped 0.2 percent before the announcement and is down around 1.4 percent in the past month.
“Now that the crown has weakened a bit since end of November I assume they will sound quite hawkish to strengthen the crown again. So they will stay on hold but be more on the hawkish side,” Hammarlund said.
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For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1131.70 -1.15 -0.10 +31.25
Czech Rep 1079.48 +3.62 +0.34 +17.13
Poland 2457.96 -1.37 -0.06 +26.18
Hungary 38836.88 -9.72 -0.03 +21.35
Romania 7792.71 -7.69 -0.10 +9.99
Greece 790.26 +0.52 +0.07 +22.78
Russia 1122.85 -6.48 -0.57 -2.56
South Africa 51835.25 +566.38 +1.10 +18.07
Turkey 11587.95 +1133.28 +1.03 +42.81
China 3300.68 +13.08 +0.40 +6.35
India 33756.28 -21.10 -0.06 +26.78
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.71 25.68 -0.15 +5.03
Poland 4.20 4.20 +0.08 +4.84
Hungary 312.41 312.68 +0.09 -1.15
Romania 4.63 4.62 -0.23 -2.13
Serbia 118.71 119.03 +0.27 +3.91
Russia 58.46 58.71 +0.43 +4.80
Kazakhstan 334.22 335.80 +0.47 -0.17
Ukraine 27.88 27.85 -0.11 -3.16
South Africa 12.70 12.70 +0.02 +8.11
Kenya 102.95 103.00 +0.05 -0.56
Israel 3.49 3.49 +0.11 +10.37
Turkey 3.82 3.82 -0.10 -7.76
China 6.58 6.58 -0.09 +5.47
India 64.07 64.11 +0.07 +6.06
Brazil 3.30 3.30 -0.00 -1.35
Mexico 19.25 19.20 -0.26 +7.61
Debt Index Strip Spd Chg %Rtn Index
Sov’gn Debt EMBIG 305 2 .04 8 05.64 1
All data taken from Reuters at 10:53 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.
Reporting by Sujata Rao and Claire Milhench; Editing by Catherine Evans