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London - Emerging stocks rose for the third session in a row on Tuesday as worries over world economic growth eased, while South Africa’s rand bounced back from losses caused by Japan’s triple disaster, rising to a one-week high.
Investors disregarded ongoing fighting in Libya and uncertainty over unrest in Bahrain and Yemen, taking their cue instead from solid gains in Asian markets as concerns about the impact of recent Japanese events on world growth abated.
MSCI’s benchmark emerging equities index added 0.5% to a one-week high, slightly underperforming world stocks. Emerging debt tightened 5 basis points to trade 266 bps over US treasuries.
“We’re seeing a bounce in sentiment that was initiated yesterday and is being continued today and the currencies that had been underperforming given pressure in the context of risk aversion are bouncing back,” said Benoit Anne, head of global emerging markets strategy at Societe Generale.
“There’s a bit of catching up taking place now. Whether this can be sustained is the big question,” he added.
The biggest loser from the Japanese crisis was the South African rand, which lost nearly 11% against the yen. Seen as one of the most heavily exposed to Japanese overseas fund flows, the rand has since recouped most of its losses to trade 2 percent below pre-earthquake levels versus the yen.
Against the dollar, the rand strengthened to trade around 6.90 - a one-week high. The yen has been knocked off record highs by concerted intervention in markets by the Group of Seven major powers last week.
The rand was also supported by data showing the current account deficit narrowing to a seven-year low in the fourth quarter of 2010, while the yield on the 2015 bond R157 fell to 7.835% from 7.895% before the data release.
“It is difficult to turn bearish on the rand at a time when the Japanese yen will be restricted from strengthening, equity markets have stabilised...the dollar is on the defensive and commodity prices are rising..,” Tradition Analytics told clients.
Turkish assets also firmed, despite oil prices remaining strong. The lira rose 0.3% against the dollar while shares in Istanbul climbed 0.8%. Persistently high oil prices and expectations of central bank tightening continued to support Russia’s rouble, which firmed 0.6% versus the dollar to three-week highs.
Oil prices have for several weeks remained more than 30% above the average of $75 a barrel implemented in Russia’s 2011 budget.
Egypt's exchange
Analysts expect Egyptian assets to take a pounding when the country’s stock exchange, closed since January 27, reopens on Wednesday.
The exchange’s benchmark index plunged 16% in the two days the exchange was open after anti-Mubarak protests erupted on January 25.
“Foreign holdings in Egyptian equities were estimated at around $13bn prior to the onset of the Egyptian unrest but this is likely to plummet, which should put pressure on the Egyptian pound,” BNP Paribas analysts told clients in a note.
“A move in Egyptian pound towards 6.00/$ is on the cards although the (central bank) will likely step in to smooth volatility,” BNP said.
Elsewhere in the Middle East, Bahrain’s credit default swaps fell 9 basis points to 344 bps while the Bahraini dinar also stabilised.
Currencies in emerging Europe were mixed against a firmer euro. Hungary’s forint and the Romanian leu both firmed 0.5%, benefitting from improved market sentiment on Europe’s bourses.
Poland’s zloty slipped 0.2% after the central bank governor said markets may be overestimating the scale of rate increases over the next year.
The zloty hit three-and-a-half month lows last week, but has trimmed some losses and is now traded at around 4.03 to the euro. The central bank will release net inflation data for January and February later.
Investors disregarded ongoing fighting in Libya and uncertainty over unrest in Bahrain and Yemen, taking their cue instead from solid gains in Asian markets as concerns about the impact of recent Japanese events on world growth abated.
MSCI’s benchmark emerging equities index added 0.5% to a one-week high, slightly underperforming world stocks. Emerging debt tightened 5 basis points to trade 266 bps over US treasuries.
“We’re seeing a bounce in sentiment that was initiated yesterday and is being continued today and the currencies that had been underperforming given pressure in the context of risk aversion are bouncing back,” said Benoit Anne, head of global emerging markets strategy at Societe Generale.
“There’s a bit of catching up taking place now. Whether this can be sustained is the big question,” he added.
The biggest loser from the Japanese crisis was the South African rand, which lost nearly 11% against the yen. Seen as one of the most heavily exposed to Japanese overseas fund flows, the rand has since recouped most of its losses to trade 2 percent below pre-earthquake levels versus the yen.
Against the dollar, the rand strengthened to trade around 6.90 - a one-week high. The yen has been knocked off record highs by concerted intervention in markets by the Group of Seven major powers last week.
The rand was also supported by data showing the current account deficit narrowing to a seven-year low in the fourth quarter of 2010, while the yield on the 2015 bond R157 fell to 7.835% from 7.895% before the data release.
“It is difficult to turn bearish on the rand at a time when the Japanese yen will be restricted from strengthening, equity markets have stabilised...the dollar is on the defensive and commodity prices are rising..,” Tradition Analytics told clients.
Turkish assets also firmed, despite oil prices remaining strong. The lira rose 0.3% against the dollar while shares in Istanbul climbed 0.8%. Persistently high oil prices and expectations of central bank tightening continued to support Russia’s rouble, which firmed 0.6% versus the dollar to three-week highs.
Oil prices have for several weeks remained more than 30% above the average of $75 a barrel implemented in Russia’s 2011 budget.
Egypt's exchange
Analysts expect Egyptian assets to take a pounding when the country’s stock exchange, closed since January 27, reopens on Wednesday.
The exchange’s benchmark index plunged 16% in the two days the exchange was open after anti-Mubarak protests erupted on January 25.
“Foreign holdings in Egyptian equities were estimated at around $13bn prior to the onset of the Egyptian unrest but this is likely to plummet, which should put pressure on the Egyptian pound,” BNP Paribas analysts told clients in a note.
“A move in Egyptian pound towards 6.00/$ is on the cards although the (central bank) will likely step in to smooth volatility,” BNP said.
Elsewhere in the Middle East, Bahrain’s credit default swaps fell 9 basis points to 344 bps while the Bahraini dinar also stabilised.
Currencies in emerging Europe were mixed against a firmer euro. Hungary’s forint and the Romanian leu both firmed 0.5%, benefitting from improved market sentiment on Europe’s bourses.
Poland’s zloty slipped 0.2% after the central bank governor said markets may be overestimating the scale of rate increases over the next year.
The zloty hit three-and-a-half month lows last week, but has trimmed some losses and is now traded at around 4.03 to the euro. The central bank will release net inflation data for January and February later.
