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EMERGING MARKETS-Emerging stocks at 7-wk highs on ECB hopes; Ukraine bonds sink
January 22, 2015 / 10:32 AM / 3 years ago

EMERGING MARKETS-Emerging stocks at 7-wk highs on ECB hopes; Ukraine bonds sink

LONDON, Jan 22 (Reuters) - Anticipation of a sizeable euro zone bond-buying programme boosted emerging market assets on Thursday, though Ukraine’s sovereign bonds sold off as its finance minister mooted restructuring talks with bondholders.

Reports the European Central Bank would launch quantitative easing amounting to 50 billion euros ($58 billion) per month from March spurred emerging European bourses higher, with Warsaw up 0.4 percent. Prague and Budapest rose 0.9 percent.

“We have seen a bit of a rally on the back of expectations from the ECB so let’s hope they deliver. Fifty billion euros a month is a lot and will be received positively by emerging markets. The question is how will they communicate that, will there be conditions attached,” said Lars Christensen, head of emerging markets at Danske Bank.

The MSCI emerging equity index rose 0.2 percent to trade at seven-week highs after buoyant trading in Asia.

However, with violence persisting in eastern Ukraine and the government appearing to seek debt restructuring, its dollar bonds fell. The 2022 issue sank 1.5 cents to 53.5 cents in the dollar while the 2023 bond dropped 0.9 cents, breaking below 50 cents in the dollar for the first time.

Ukraine’s yield spread over U.S. Treasuries -- the premium investors demand to hold its debt over safe-haven bonds -- widened 80 basis points to a record high on the EMBI Global Index

Speaking at the World Economic Forum in Davos on Wednesday, Ukraine’s finance minister Natalie Jaresko said the government had requested a longer-term funding programme from the International Monetary Fund and plans talks with bondholders.

The rouble was weaker against the dollar, hurt by international tensions over Russia’s role in Ukraine as well as the oil price rout.

With Brent crude dropping 0.5 percent, Nigeria’s naira continued its spiral downwards, falling 2.9 percent against the dollar.

Nigerian currency dealers agreed on Wednesday to halt trading if there is a more than 2 percent intraday slide in the naira after it ended at a record closing low for a second straight day despite central bank intervention.

Turkey’s lira was 0.2 percent lower following comments on Wednesday from President Tayyip Erdogan that the central bank’s 50-basis point rate cut was not big enough.

Egyptian stocks rose to 6-1/2-year highs, buoyed by falling oil prices which have allowed the central bank to start cutting interest rates and boost growth.

For GRAPHIC on emerging market FX performance 2015, see

For GRAPHIC on MSCI emerging index performance 2015, see

For GRAPHIC on MSCI emerging Europe performance 2015, see

For GRAPHIC on MSCI frontier index performance 2015, see

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) ($1 = 0.8607 euros) (Additional reporting by Sujata Rao; Editing by Ruth Pitchford)

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