Emerging Markets Emerging stocks rebound with oil near US$46 as commodities rally

by **Cals** Fri 22 Apr 2016, 04:39

Emerging Markets

[size=28]Emerging stocks rebound with oil near US$46 as commodities rally

By Bloomberg / Bloomberg | April 21, 2016 : 4:56 PM MYT

HANOI/MUMBAI (April 21): Energy shares led a rebound in emerging-market stocks as Brent crude prices traded near US$46 a barrel, after Iraq said a new round of talks on a production freeze may take place as soon as next month. A rally in currencies stalled amid a resurgent U.S. dollar.

The Bloomberg Commodity Index climbed for a fourth day and reached the highest level in more than five months. China Oilfield Services Ltd. and Cnooc Ltd. led energy gains in the MSCI Emerging Markets Index, which wiped out Wednesday’s loss. Dubai stocks rose to the highest level since October and Turkish shares halted a two-day loss. The Shanghai Composite Index slid to a three-week low as Fitch Ratings warned that a renewed pickup in borrowing is adding to unsustainable debt levels that could derail the economic recovery.

China weakened its daily yuan fixing by the most in a week after a Bloomberg gauge tracking the dollar against 10 major peers halted a three-day loss in New York. The strength in the greenback weighed on Asian currencies on Thursday and some investors are taking profit following the recent gains, said Ken Cheung, a currency strategist at Mizuho Bank Ltd in Hong Kong. The Thai baht fell the most, while South Korea’s won advanced.

“Asian markets are reacting to the rebound in oil prices and emerging markets are following on from the U.S. stocks gains overnight,” said Mixo Das, a Singapore-based strategist at Nomura Holdings Inc. The weakness in Asian currencies is a technical shift amid the strong dollar, he said.

Stocks

The MSCI Emerging Markets Index gained 0.7% to 855.10 as of 9:02 a.m. in London, following Wednesday’s 0.4% decline. The index has rallied 7.7% this year. The gauge is trading at 12 times projected 12-month earnings, compared with a multiple of 16 for the MSCI World Index, which has climbed 2% this year.

All 10 of the industry groups in the MSCI gauge rose, with energy shares rising 1.3% and telecommunications 1.2%. China Oilfield Services rallied 6.2% and Cnooc 5.5%.

Benchmarks climbed across Asia, with Chinese equities traded in Hong Kong and Vietnamese stocks leading the advance. The Jakarta Composite Index headed for its highest close since July. Indonesia’s central bank is expected to keep borrowing costs on hold at a meeting Thursday, according to the majority of economists in a Bloomberg survey. It has announced it will switch to the seven-day reverse repurchase rate as the new benchmark in August.

The Hang Seng China Enterprises Index of mainland shares traded in the city was up 1.3%, while the Shanghai Composite Index retreated 0.7%. Economists now see China’s central bank keeping its key interest rate on hold until the fourth quarter.

Currencies

The MSCI Emerging Markets Currency Index was little changed following a two-day gain that took it to the highest since July. The baht dropped 0.4%, trimming this year’s gain to 3%. Bank of Thailand is ready to stabilize its financial markets if the baht movements affect the real economy, its senior director Vachira Arromdee said yesterday.

South Africa’s rand weakened 0.5% and Turkey’s lira lost 0.4%. The Korean won and Indian rupee edged up at least 0.1% each.

Bonds

Malaysia sold US$1.5 billion of Islamic bonds. It paid a bigger premium on the 10-year portion than last year as a delayed interest payment by its troubled state investment fund weighed on demand. The sale, which included US$500 million of 30-year notes, drew US$6.3 billion of orders, compared with US$9 billion for an issuance of the same size in April 2015. The sukuk due in 2046 was sold at 4.08%, a premium of 145 points over U.S. Treasuries versus 170 previously. Those due in 2026 sold at 3.179%, a spread of 135 basis points compared with last year’s 115 points.

In the local currency market, the yield on South Korea’s 10-year bonds rose two basis points to 1.83%. Thailand’s equivalent also climbed six basis points to 1.76%.
[/size]