Emerging Markets Emerging stocks rebound on China stimulus efforts as Yuan jumps

by **Cals** Mon 15 Feb 2016, 22:55

Emerging Markets

[size=28]Emerging stocks rebound on China stimulus efforts as Yuan jumps

By Bloomberg / Bloomberg | February 15, 2016 : 9:57 PM MYT

LONDON/JAKARTA (Feb 15): Emerging-market stocks rebounded after their worst weekly drop in a month and currencies rallied amid speculation authorities from Europe to Japan will increase stimulus to stabilize global economic growth. China’s yuan jumped by the most since a dollar peg was scrapped in 2005 and the ruble rallied.

Benchmark indexes in Qatar, South Africa, India and Chinese shares listed in Hong Kong rose at least 2.4%. An MSCI Emerging Markets Index gauge of energy companies advanced the most in more than a week as oil climbed toward US$34 a barrel in London. Saudi banking stocks ended a four-day drop after the kingdom’s central bank was said to be easing rules on lending to stimulate growth. The yuan surged 1.2% after China’s central bank chief voiced support for the currency. Brazil’s real gained as prices of raw materials from crude to copper advanced.

"The jump in the yuan and comments from the People’s Bank of China have provided some confidence to the market," said William Jackson, a London-based emerging markets analyst at Capital Economics Ltd. "If sentiment towards China turns, there might be scope for a recovery in emerging-market equities.”

Stocks also rallied as investors judged losses that pushed global equities into a bear market last week were excessive. Sentiment toward riskier assets had soured on skepticism whether central banks can arrest the slide in the world economy, while Federal Reserve Chair Janet Yellen indicated the U.S. won’t rush to raise interest rates again. Investors await European Central Bank President Mario Draghi, who will address lawmakers in a two-hour testimony on Monday.

The MSCI Emerging Markets Index increased 2.1% to 726.33 at 12:36 p.m. in London, after dropping 3.8% last week. A gauge tracking 20 emerging-market currencies advanced for a second day, while Russian bonds led gains in eastern European debt markets.

Stocks

All 10 industry groups in the MSCI index rose on Monday, as energy shares climbed 3.6%. Cnooc Ltd jumped 6.4% and Lukoil PJSC climbed for a third day in Moscow, after Reuters reported the company expressed interest in buying a stake in Bashneft PAO, which increased 2.5%.

The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong jumped 4.8%, the biggest increase since Sept 9. China’s balance of payments position is good, capital outflows are normal and the exchange rate is basically stable against a basket of currencies, People’s Bank of China Governor Zhou Xiaochuan said in an interview published in Caixin magazine over the weekend.

Al Rajhi Bank advanced 1.9% in Riyadh. Banks were told they can lend the equivalent of 90% of their deposits, up from an earlier limit of 85%, according to people with knowledge of the matter, who asked not to be identified as the information is private. The Bloomberg BGCC 200 Index of stocks in the Gulf Cooperation Council countries added 1.7%.

Indian shares jumped 2.5%, rebounding from the worst weekly loss since 2009, while The FTSE/JSE Africa All Share Index in Johannesburg and the Micex Index in Moscow rose at least 1%.

Currencies

A gauge of 20 currencies rose 0.3% as currencies in Russia and Malaysia advanced at least 1%. The yuan caught up with a decline in the greenback during the Chinese New Year holiday, after the central bank boosted the daily fixing against the dollar by the most in three months. The ruble got a boost as exporters bought the local currency to prepare for almost US$15 billion of tax payments due this month, according to ING Groep NV estimates.

“In the short term, these gains could be maintained," said Mitul Kotecha, head of Asian foreign-exchange and interest-rate strategy at Barclays Plc in Singapore. "But given the potential for risk aversion to move higher, and considering the volatility that’s still in place in oil prices and capital outflows, it’s difficult to see this sort of rally being sustained in the medium term.”

Turkey’s lira weakened 0.5%, amid an eruption of violence on Turkey’s border with Syria that triggered concern security risks were escalating. The lira led declines among 24 developing nations, as currencies in Poland, the Czech Republic and Hungary also depreciated.

Bonds

Russian bonds climbed, pushing the five-year yield down 10 basis points to 10.33%. While Polish and Czech bonds rose, Turkish bonds slid, sending 10-year yields up 11 basis points, the most in a week, to 10.54%.

South Korea’s bonds also fell on speculation the Bank of Korea will refrain from cutting interest rates on Tuesday, after tensions with North Korea prompted foreign funds to pull money from the nation’s debt.

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