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Emerging assets rally on China data

Kuala Lumpur - Emerging assets rallied from a three-day decline as a rebound in oil overnight and data showing a gain in China’s producer prices bolstered sentiment for higher-yielding securities.

A gauge tracking the shares of developing nations rose 0.4% at 07:21 after China’s factory-gate prices rose for the first time since 2012, relieving a source of global disinflationary pressure.

Thailand’s baht led gains in Asian currencies, heading for the biggest advance in a year after the death of King Bhumibol Adulyadej, the world’s longest reigning monarch. Benchmark stock indexes halted a seven-day slide in the Philippines and headed for the biggest gain in more than a week in South Korea.

“Once China’s economy improves, that will lead the rebound in growth in otherAsian markets, especially Southeast Asia,” said Danny Wong Teck Meng, chief executive officer at Areca Capital Sdn. in Kuala Lumpur, who oversees the equivalent of $170m.

“Oil hovering at this level is conducive for global growth, if prices are stable and not too volatile.” Crude held above $50 per barrel this week.

Stocks

The MSCI Emerging Markets Index pared its losses this week to 2.3%, its worst weekly performance in four weeks. Ten out of 11 industry groups rose on Friday, led by energy-related stocks and materials companies. The developing-nation gauge, which has advanced 13% this year compared with 1.6% gain in the MSCI World Index.

Thailand’s SET Index jumped 3.9%, the most in more than three years on prospects for a smooth transition following the death of King Bhumibol Adulyadej, the world’s longest reigning monarch. True surged 9.8%, the most in seven months, leading gains.

The Philippine Stock Exchange Index rose 0.9%, halting a seven-day slide, while South Korea’s Kospi index advanced 0.5%. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong added 0.7, ending a four-day drop. The Shanghai Composite Index fell 0.5%.

Currencies

The MSCI Emerging Markets Currency Index rose 0.2%, paring its weekly loss to 0.8%. The baht climbed 0.9%, taking its two-day gain to 1.2%. It’s still down 1.2% for the week as Thailand mourns the death of 88-year-old monarch, a unifying force in a nation which has seen 10 coups during his seven-decade reign.

Malaysia’s ringgit climbed as much as 0.4% as oil headed for a fourth weekly advance after a decline in US fuel supplies and crude stockpiles at the delivery point for New York futures offset an increase in nationwide inventories. West Texas Intermediate for November delivery was at $50.58 a barrel on the New York Mercantile Exchange.

The yield on South Korea’s 10-year government bonds rose 3.5 basis points to 1.58%, taking its increase this week to five basis points.

Fed, China

Emerging market assets completed a three-day slide on Thursday after data showed China’s exports fell and futures indicated that the  odds of a US rate hike this year remained above 60%. The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, has climbed 0.7% this week.

“The dollar has rallied a lot and although labor market conditions show that the economy is improving, it is by no means roaring with a vengeance,” said Trinh Nguyen, a senior economist at Natixis SA in Hong Kong.

“As China is a global trade powerhouse, its underperformance raises questions about the health of the global economy. That means that although the Federal Reserve may raise rates in December, markets are questioning if it can continue.”

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