Publications
Partners
Seoul - Emerging-market stocks rose for a third day after the Bank of Japan adjusted its monetary stimulus programme following a comprehensive review of policy.
A gauge of developing-nation equities climbed to the highest in a week before the Federal Reserve also announces a policy decision Wednesday, with about 80% of traders betting the US central bank will refrain from raising interest rates. Most developing-nation currencies weakened against the dollar after the yen dropped following the BOJ’s statement.
“The BOJ news is lifting the market as Japanese investment flows to emerging markets are expected to continue in the context of the extended BOJ stimulus,” said Attila Vajda, managing director in Ho Chi Minh City at Project Asia Research & Consulting Pte, an Singapore-based advisory firm.
“However, investors will still need to wait for the Fed’s decision as they need more guidance on rates and consequent emerging-market debt costs.”
Stocks
The MSCI Emerging Markets Index of stocks rose 0.4% as of 08:35 after climbing 1.5% during the previous two sessions. All except one of the 11 industry gauges in the index advanced, led by real estate and utility companies.
Thai equities led gains, with the benchmark index rising 1.1%, while Taiwan’s climbed 0.7% and India’s advanced 0.5%. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong, jumped 1.1% while the Shanghai Composite Index rose 0.2%.
The BOJ said it would move away from a rigid target for expanding the money supply and instead seek to control the yield curve. Policy makers, who kept their benchmark rate at negative 0.1%, also scrapped a target for the average maturity of its government bond holdings.
A rally in emerging-market assets has stalled in the past month amid increasing volatility as concern has mounted that monetary authorities are becoming less committed to stimulus. In addition to Wednesday’s BOJ and Fed decisions, central banks in New Zealand, Indonesia and South Africa will announce their policy reviews on Thursday.
Currencies
The MSCI Emerging Markets Currency Index halted a two-day gain, dropping 0.2%. The Taiwan’s dollar and the Malaysian ringgit both weakened 0.3%, while the Romanian leu fell 0.2%. The yen fell 0.5%.
India’s rupee slid to the lowest level in three weeks as traders said the government stepped up dollar purchases to pay month-end bills. The currency declined as much as 0.2% before trading down 0.1%.
“State-run banks have been seen buying dollars, possibly on behalf of the government, and that’s weighing on the rupee,” said Paresh Nayar, head of currency and money markets at the local unit of South African lender FirstRand in Mumbai. “The markets are a bit confused about how the BOJ’s statement has to be taken.”
There’s a 22% chance the Fed will increase its benchmark rate when it announces its policy decision in Washington, according to data compiled by Bloomberg based on futures. The probability of a move by its December meeting is 58%.
