Emerging markets set for gain
Mumbai - Emerging-market currencies and stocks headed for their best week since October as rising commodity prices lure investors and on expectations Chinese leaders will seek to promote stability in the yuan.
South Korea’s won had its biggest weekly advance in almost five months, while Russia’s ruble headed for its best week since October. Indonesia’s rupiah strengthened for a 12th day to a nine-month high.
Taiwan’s central bank took the unusual step of intervening before noon on Thursday to stem gains that could harm exports. India’s benchmark stocks gauge was poised for its largest weekly increase in four years after Finance Minister Arun Jaitley pledged to keep next year’s budget deficit within 3.5 percent of gross domestic product.
Foreign funds have pumped more than $2.6 billion into Korean, Taiwanese, Indian and Thai equities this week as positive US data and stimulus measures in China eased concern that global growth is slowing, while a Bloomberg gauge of commodity prices rose to a five-week high. Investors will be closely watching American non-farm payrolls data on Friday for clues on the health of the US economy and the pace of Federal Reserve rate increases. Chinese leaders are expected to use this weekend’s National People’s Congress to temper depreciation bets for the yuan.
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“The equity flow to emerging-market Asia has jumped this week,” said Ken Cheung, Asian foreign-exchange strategist at Mizuho Bank in Hong Kong. “Rebounding commodity prices have played a role” and the Malaysian ringgit should extend gains, he said.
A Bloomberg gauge of 20 developing-nation currencies rose 2.2 percent this week, the most since October 9, as of 4:30 p.m. in Hong Kong. The ruble has strengthened 4.2 percent and South Africa’s rand rallied 3.3 percent. The won advanced 2.9 percent, the ringgit gained 2 percent and the rupiah is up 1.9 percent. The Indian rupee advanced 2 percent, heading for its biggest weekly increase since May 2014.
The onshore yuan strengthened 0.31 percent this week in Shanghai. Chinese leaders will probably refrain from announcing any detailed changes to the country’s yuan policy this year at the congress to avoid spurring further volatility, according to Oversea-Chinese Banking Corp.
The MSCI Emerging Markets Index rose 0.5 percent to 783.94, extending its weekly advance to 6 percent, the most since Oct. 9. The gauge is now down 1.3 percent for the year. Energy shares have led gains, rising 8.7 percent since February 26 as Brent crude rallied 5.4 percent to $37 a barrel. The Bloomberg Commodity Index increased 2.2 percent.
India’s S&P BSE Sensex Index advanced 6.2 percent, the most in a week since December 2011. The Hang Seng China Enterprises measure in Hong Kong rose 6.5 percent since February 26, while Thailand’s benchmark gauge was up 2.7 percent.
Chinese government bonds fell, pushing the 10-year yield up four basis points this week to 2.92 percent. That on same-tenor Korean bonds rose 11 basis points to 1.89 percent. In contrast, Indonesian and Indian debt benefited from the risk-on environment. Their 10-year yields dropped a respective 28 basis points to 7.98 percent, and 13 basis points to 7.65 percent.