Emerging Markets Emerging-market assets extend gains as Korea stimulus boosts won
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Emerging Markets Emerging-market assets extend gains as Korea stimulus boosts won
- Emerging Markets
[size=28]Emerging-market assets extend gains as Korea stimulus boosts won
By Bloomberg / Bloomberg | June 29, 2016 : 4:09 PM MYTSINGAPORE (June 29): Emerging-market stocks and currencies rose for a second day on speculation policy makers will follow South Korea’s lead in enacting stimulus in the wake of Britain’s decision to exit the European Union.
The MSCI Emerging Markets Index of shares climbed 1.2% as of 3:18 p.m. in Hong Kong, trimming its loss to 2.4% since the close of trading on June 23, before the Brexit vote set off a global selloff. Investors have also cut forecasts as to when the Federal Reserve will raise borrowing costs again, an issue that’s hung over emerging markets on concern higher U.S. rates would spur outflows. South Korea announced 20 trillion won (US$17 billion) in monetary stimulus on Tuesday to complement record low interest rates, spurring a 1% rally in the Kospi share index on Wednesday.
“Risk sentiment has improved,” said Suan Teck Kin an economist at United Overseas Bank Ltd in Singapore. “The impact on Asia from an economic point of view is not that significant from the U.K. unless the separation has a negative impact on a broader EU.”
Currencies
The South African rand led gains and appreciated 1.2%, while the South Korean won rose 1% and Malaysia’s ringgit 0.7%. The Bank of Korea has also cut interest rates to 1.25% to stimulate growth, with policy makers due to meet next on July 14. The won has weakened 1.4% this quarter, headed for its first three-month loss since September 2015.
“The fiscal stimulus is positive to a certain extent that it is supportive of growth,” said Eddie Cheung, a currency strategist at Standard Chartered Plc in Hong Kong. “Risk seems to be coming back a bit. I’m not sure how long that can last. It could be a dead-cat bounce given that we haven’t really seen a big shift in rhetoric around Brexit.
The Mexican peso appreciated 0.7% on Wednesday and Taiwan’s dollar climbed 0.3%. While China strengthened the yuan’s daily fixing for the first time in four days, the spot rate was little changed. The MSCI Emerging Markets Currency Index advanced 0.5%.
Indonesia’s central bank said it will intervene in the foreign-exchange market to prevent the rupiah from gaining too much from a possible increase in inflows following a recently passed tax amnesty law. Bank Indonesia expects the program to result in excess funds, which it can absorb using instruments in the currency market and through deposits, Deputy Governor Hendar told reporters in Jakarta on Tuesday. The rupiah appreciated 0.1% on Wednesday.
Stocks
The MSCI Emerging Markets Index added to Tuesday’s 1.3% gain. Materials, telecommunications and healthcare shares led the advance on Wednesday. Brent crude rose 0.9% on top of the 3% increase in the previous session.
Indonesia’s Jakarta Composite Index climbed 1.5%. Chinese shares traded in Hong Kong on the Hang Seng China Enterprises Index rose 0.3%, rebounding from an earlier loss. The Shanghai Composite Index advanced 0.7%.
In Hungary, the Budapest Stock Exchange Index rose 0.9%. Turkey’s Borsa Istanbul 100 Index fell 0.1%, after earlier dropping as much as 0.4% after the deadly airport attacks. The lira appreciated 0.4%.
Bonds
Indonesian bonds rose after the passing of the tax bill. The 10-year yield dropped eight basis points to 7.51%, headed for its lowest close since April 21. It has declined 28 basis points so far this week. Malaysia’s equivalent yield fell for a third day and was down four basis points at 3.75%.
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