China stocks lead gains on recovery hopes; S.African rand slides
Jan 16 (Reuters) – Emerging market stocks rose on Monday, with mainland Chinese stocks leading gains on hopes of an economic recovery as the country eases strict COVID-19 restrictions 19 and reopen the borders, while most of the currencies fell against the dollar.
Developing world currencies edged lower against a dollar that is trying to regain momentum. An index of EM currencies retreated from a nine-month high and was on track to break a 15-session winning streak – a run not seen in at least a decade.
The South African rand fell 1.6% to 17.06 per dollar.
“The laurel’s short-term retreat from overbought territory may also be a reflection on ongoing power struggles in the country and its ongoing stress on business and ultimately GDP local,” said Shaun Murison, senior market analyst at IG, referring to struggling power utility Eskom which is implementing the highest level of blackouts until further notice.
Inflation and retail sales data due this week will be watched for further clues about the state of the economy.
“A short-term range for USD/ZAR is currently considered between the R16.70/$ and R17.40/$ levels.”
The MSCI index of emerging market shares rose 0.1%. The index is looking to mark its 10th consecutive session in the black, having gained nearly 8% over the past nine.
Trading volumes appeared to be dampened by a market holiday in the United States.
Heavyweight Chinese blue-chips rose 1.6% after Chinese health officials said COVID-19 infections in the region had likely peaked.
Investors abandoned Chinese domestic bonds for stocks as China’s central bank increased liquidity injections on Monday. The yuan currency strengthened past the psychologically important 6.7 per dollar as it benefited from continued capital inflows.
All eyes will now be on China’s economic growth and retail sales data this week.
Sentiment was also boosted recently by rising bets that the US Federal Reserve will opt for a smaller interest rate hike at its next meeting.
Emerging markets-focused asset manager Ashmore reported a 2% increase in assets under management in the final quarter of 2022, driven especially by inflows into corporate debt. Ashmore expects investors’ risk appetite to increase over the next 12 months.
Hong Kong technology and property stocks, some central European shares as well as Indian were among the decliners on Monday.
In central Europe, the currencies of Hungary and Poland led losses, falling 0.5% and 0.1% against the euro amid worries about European Union funds. For a GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh
For a GRAPHIC on the performance of the MSCI emerging index in 2023, see https://tmsnrt.rs/2OusNdX
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For a RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Alex Richardson)