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Seoul - Emerging-market assets rose for a second day as the momentum in the Brexit campaign looked to be shifting to the remain camp before the vote on Thursday.
South Africa’s rand and Russia’s rouble led a rally in developing currencies as bookmaker odds of the UK leaving the European Union fell to 30% from as high as almost 45% last week.
India’s rupee was the only one of 24 emerging-market exchange rates to decline after central bank Governor Raghuram Rajan said he’d step down when his term ends in early September.
South Korea’s Kospi index paced an advance in Asian stocks as Brent crude extended gains after jumping the most in five weeks on Friday.
Campaigning in the UK restarted on Sunday after being suspended for 2 1/2 days following the murder of Labour lawmaker Jo Cox, a prominent member of the remain group.
That appears to have halted the momentum of the leave camp, which had been ahead in a number of polls, amid concern some of the anti-immigrant rhetoric had become too heated.
"Asian currencies have largely been doing okay, in line with broader sentiment, as the odds of the UK voting to remain within the EU have shortened," said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank in Singapore.
A further slowdown in China and higher US borrowing costs are still the major risks for the region’s exchange rates, he said.
The prospect of the UK exiting the world’s largest trading bloc has fuelled investor nervousness across the globe. The Federal Reserve said June 15 the Brexit referendum was a factor in its decision to keep interest rates on hold.
Currencies, bonds
The MSCI Emerging Markets Currency Index rose 0.5% as of 4 p.m. in Hong Kong, taking its two-day gain to 0.9%. The gauge had dropped 1.4% over the previous six days on signs the UK leaving the EU was becoming more likely.
The rand strengthened 1.3%, while Russia’s rouble, Hungary’s forint and South Korea’s won all rose 1.1%. The Mexican peso and Turkey’s lira climbed 0.8%. The People’s Bank of China raised the yuan’s fixing by 0.13 after reducing it by 0.31% last week. India’s rupee fell 0.5%.
Nigeria’s naira will be allowed to float freely on Monday, and pent-up demand for dollars could push it at least 20% weaker, according to analysts including Renaissance Capital and Exotix Partners.
In sovereign bond markets, the yield on Korea’s 10-year notes rose four basis points to 1.64%. That on similar-maturity paper from India advanced two basis points to 7.52%. The yield on Poland’s 10-year securities dropped seven basis points to 3.09%.
Stocks
The MSCI Emerging Markets Index of shares rose 1.2% following a 0.8 percent gain on Friday. The Kospi index closed up 1.4%, while the Hang Seng China Enterprises Index of mainland share listed in Hong climbed 1.8%. Turkey’s benchmark gauge rallied 1.8% and Hungary’s advanced 1.6%.
India’s S&P BSE Sensex gauge rose 0.6% after being down as much as 0.7% in early trading following the announcement of Rajan’s departure over the weekend. Since taking office in 2013, the former International Monetary Fund chief economist helped strengthen the rupee, cut its swings by more than half and propelled the nation’s foreign-exchange reserves to an all-time high.
China Petroleum & Chemical Corporation rose 3.1% as Brent crude advanced 1.7% after a 4.2% surge on Friday. Oil has rallied almost 80% since mid-January as disruptions from Nigeria to Canada and falling output in the US trim a global glut.
"We have advised clients to reduce holdings of equities as the uncertainty over the British referendum is too high," said Sasikorn Charoensuwan, the Bangkok-based head of research at Phillip Securities (Thailand).
"We still don’t like the oil theme now because the oversupply situation still exists."
