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Jakarta - Gauges of emerging-market stocks and currencies climbed to their highest levels in a year as reduced bets for US interest-rate increases spurred demand for higher-yielding assets.
The MSCI Emerging Markets Index of shares jumped the most in three weeks, with telecommunications and technology companies leading gains in all 10 industry groups.
Chinese stocks in Hong Kong rallied after a private manufacturing index unexpectedly rose to the highest since February 2015. Turkish equity benchmark climbed for a fourth day. Malaysia’s ringgit and South Korea’s won led gains as a measure of developing-nation exchange rates advanced.
Equities and currencies are extending two months of gains after a report showed the US economy grew at less than half the pace forecast by analysts, fueling bets the Federal Reserve will refrain from raising rates.
Japanese Prime Minister Shinzo Abe may unveil details of his fiscal package on Tuesday after the Bank of Japan added to its easing last week, and economists forecast policy rates in Australia and England will be cut from record lows this week.
‘Risk-on’ mode
“Investors are back in ‘risk-on’ mode as the recovery among developed economies hasn’t been as strong as many people expected,” said Dwianto Oktory, a portfolio manager at PT Indo Premier Investment Management in Jakarta. “I don’t think we can expect major central banks to raise interest rates this year. This environment is good for emerging markets.”
The MSCI equities gauge rose 1.3% to 884.41 at 10:09, headed for its highest close since August 10 last year. The index has risen 11% this year and trades at 12.4 times the 12-month estimated earnings of its members. That compares with 3.6% gain in the MSCI World Index which is valued at a multiple of 16.4.
Samsung Electronics gained 1.9% to the highest since January 2013, and Taiwan Semiconductor Manufacturing added 2.6%, leading gains among technology companies. China Mobile gained 2.2% in Hong Kong.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong climbed as much as 2.4%, the most since May 25.
The Jakarta Composite Index jumped 2.8%, rebounding from the steepest drop in five months, before data this week that’s forecast to signal a recovery in Southeast Asia’s largest economy. PT Hanjaya Mandala Sampoerna surged 8.8%, its best gain since October, after slumping 9.7% on July 29.
Turkey’s Borsa Istanbul 100 Index gained 1.7%, Russia’s Micex rose 0.6% and Poland’s benchmark advanced 0.4%.
Currencies, bonds
The MSCI Emerging Markets Currency Index rose 0.5%, adding to July’s 1% gain and a 2.4% advance in June.
The ringgit led the rally, climbing 1.2%, as an increase in crude oil prices boosted growth prospects for Asia’s only major net crude exporter. The currency’s biggest jump in four months followed a 1% slump last month that marked Asia’s worst performance. The won rose 1.1%, the most in three weeks. Turkey’s lira strengthened 0.4%.
Sovereign bonds gained across Asia. The yield on India’s 10-year notes retreated three basis points to 7.13%, the lowest since May 2013. The yield on similar-maturity notes fell two basis points in Indonesia, dropped three basis points in South Korea and declined four basis points in Malaysia.
Futures signal 36% chance of higher US rates by year-end, down from a 48% probability a week earlier. The first month where traders see better than even odds for an increase has been pushed back to September 2017 from March.
“Emerging-market assets are responding positively to fading odds of Fed-rate hikes as the US reported weaker economic growth,” said Gao Qi, a foreign-exchange strategist at Scotiabank in Singapore. “We continue to expect EM Asian currencies to benefit from accommodative external liquidity, reflationary policies and steadier market sentiment in the coming weeks.”
