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Dubai - Emerging-market equities halted a four-day slide, joining global financial markets in showing resiliency after recent geopolitical shocks. The rand and Russian ruble led gains in developing-nation currencies amid a rise in crude oil.
The MSCI Emerging Market Index erased a loss of 0.3% to finish little changed, while a basket of currencies rose 0.1%.
The rand traded 0.22% firmer at R13.96/$ by 07:36 from its overnight close of R13.99 in New York.
The rand hovered for the most of Tuesday around R14.15 to the greenback mainly on the back of oil companies buying, "but that is where it hit a brick wall and sporadic selling then saw it move all the way down to 13.96 by the time the US session ended", said Umkhulu Consulting's Adam Phillips in his daily note to clients.
The rand was also boosted by the euro's rise from a low of 1.0350 to the dollar to just above 1.04.
Phillips reckons that while the rand strengthened a good 18 cents on Tuesday, it could easily give back some gains or continue down to R13.85/$.
"A lack of interest could see the rand try a stronger tack today, especially as the euro is above 1.04, but I am sure nearer to 13.90 importers will want to cover, while 14.15 will attract export interest," said Phillips.
"However, the overall view is that one has to be long dollar going into 2017 given what [President-elect Donald] Trump says he will do and with other countries committed to loose monetary policies."
Turkey’s lira gained 0.1%, while the Egyptian pound slumped 2.8% to a record 19.36 to the dollar as the US Federal Reserve raised interest rates to support the economy.
Egyptian stocks are shrugging off emerging-market losses to post the world’s biggest gains since the Federal Reserve raised interest rates. The rally may extend in 2017, according to EFG-Hermes Holding.
The nation’s November 3 decision to float its currency, effectively cutting its value by half, has unleashed the biggest inflows of foreign investment into the stock market since the 2011 Arab Spring. The pound’s weakness has kept the benchmark EGX 30 Index trading at a discount of 34% in dollar terms to its pre-float value.
Egypt is “disconnected from the negative impact on emerging markets due to rising US rates and a stronger dollar," said Mohamad Al Hajj, Dubai-based equity strategist for the Middle East and North Africa at EFG-Hermes Holding. "People are taking the view that the pound has overshot and will appreciate, in addition to expected earnings recovery next year."
Egypt’s EGX 30 Index jumped 3.4%, pushing its gain in 2016 to 73%.
The Russian ruble strengthened as Brent crude gained.
Meanwhile, assets in developing nations stanched a series of declines sparked by speculation US interest rates will rise faster than previously expected as President-elect Donald Trump seeks to increase public spending. The majority of economists surveyed by Bloomberg say Trump will ease sanctions against Russia next year.
The biggest concerns in 2017 for investors in investment-grade assets are “populism in politics” and rising yields, while their non-investment grade counterparts are worried about asset bubbles and geopolitical conflict, Bank of America Merrill Lynch says in a survey-based report.
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