April 22, 2015 / 9:32 AM / 4 years ago

EMERGING MARKETS-China bull market fuels emerging stocks rally

LONDON, April 22 (Reuters) - Emerging stocks resumed their climb on Wednesday and inched towards recent seven-month highs, buoyed by a 2.5 percent surge on the Shanghai market and a growing consensus that interest rate rises in the United States are still months away.

The MSCI emerging stocks index was 0.5 percent higher, following a 0.4 percent gain on the Asia Pacific excluding Japan benchmark.

The gains came after Chinese stocks climbed to fresh seven-year highs, spurred by a commentary in state media saying the equities bull market “has just begun” and that there was no bubble.

“The China story is going to continue. The conditions on the ground for this government-sponsored rally are still there and there’s no reason to think anything’s going to change now,” said Ilan Solot, emerging market currency strategist at Brown Brothers Harriman.

“But there’s still a question over when the U.S. Federal Reserve will raise rates ... There’s a risk the markets are underestimating the Fed’s resolve. If the dollar gets traction again, that’s when you’re going to see this enthusiasm for emerging markets start to wane.”

Elsewhere, the rouble rose 0.5 percent against the dollar, with analysts blaming sales of foreign currency by exporters and despite oil price weakening following the end of a month-long military campaign by a Saudi-led coalition in Yemen.

Policymakers have talked down the rouble in recent days, with the central bank’s first deputy governor commenting that the strengthening of the currency “has finished”. Earlier in the week the central bank raised the rate at which it lends foreign currency to banks.

Turkey’s lira was 0.15 percent weaker against the dollar ahead of a central bank meeting that analysts expect to conclude with no changes to monetary policy.

In Central Europe, the Polish zloty paused in its recent rally and declined 0.3 percent against the euro after reaching a 3-1/2 year high on Tuesday. Hungary’s forint dropped 0.5 percent in the wake of a 15 basis point rate cut earlier in the week.

The dollar was unchanged against the real as Brazilians prepared to return to work after a national holiday. After markets close, Brazil’s state-run oil company Petrobras is due to release audited fourth quarter financial statements following months of delays in the wake of a corruption scandal.

For GRAPHIC on emerging market FX performance 2015, see link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2015, see link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2015, see link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2015, see link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Editing by Gareth Jones)

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