Publications
Partners
Jakarta - Emerging-market stocks rose to a three-week high as optimism the US economy will withstand higher interest rates improved the outlook for exporters from developing nations.
Chinese equities jumped the most since March amid speculation MSCI Inc. will include yuan-denominated shares in its global benchmark indexes next month. A gauge of emerging-market currencies advanced, led by South Africa’s rand and Indonesia’s rupiah.
Gains in oil prices and developed-nation shares in the past week also boosted higher-yielding assets after they fell earlier this month when Federal Reserve officials signaled rates may rise as soon as June.
“Resilient oil prices are supporting the sentiment for emerging-market assets, which is also guided by a sense that an improving US economy is good for emerging markets,’’ said Roy Teo, a senior currency strategist at ABN Amro Bank NV in Singapore. “Going forward, the pace of Fed rate hikes and economic growth in China will be influencing the EM assets.’’
Emerging-market assets are showing signs of recovering from a slump earlier this month as concern eases that higher U.S. rates will undermine global growth. Reports this week may prove crucial in determining whether the Federal Reserve will act as soon as its June meeting with its favorite inflation gauge due Tuesday and May payrolls data on Friday.
The MSCI Emerging Markets Index of shares rose 0.4% as of 08:05, set for its highest close since May 4. The gauge has still fallen 3.4% in May. The MSCI Emerging Markets Currency Index climbed 0.1%, trimming its decline this month to 2.9%.
There’s a 30% chance the US central bank will raise rates at its June 14 to June 15 review, according to data compiled by Bloomberg based on fed fund futures. The odds have increased from as low as 4% on May 16. Fed chair Janet Yellen said last week improvement in the US economy would warrant another rate increase in coming months.
US financial markets reopen on Tuesday after the Memorial Day holiday.
Stocks
Chinese shares rallied after Goldman Sachs said the probability they will win MSCI inclusion has increased to 70% from 50% just last month thanks to new rules aimed at curbing trading halts and a clarification by the regulator about beneficial ownership rules.
For details on Goldman Sachs’s view on China stocks MSCI inclusion, click here.
The Shanghai Composite Index surged 2.9%, set for the biggest gain since March 2, accompanied by a pickup in turnover. The rally was uninterrupted by a sudden plunge in stock-index futures, which fell by the 10% daily limit before snapping back in less than a minute.
“The market is expecting that mainland shares will have a pretty high chance of joining the MSCI’s global indexes next month,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai.
The Hang Seng China Enterprises Index, which tracks Chinese stocks listed in Hong Kong, jumped 1.5% and South Korea’s Kospi Index gained 0.8%.
Currencies
The rupiah strengthened after Juda Agung, executive director of monetary policy at Bank Indonesia, said the currency’s recent depreciation indicated it was “slightly deviating” from fundamentals.
The central bank is “unconvinced” that rupiah will weaken to 14 000 per dollar as the US economy is not too solid, he said. The currency climbed 0.2% to 13 618.
The rand rose 0.2% and Taiwan’s dollar gained 0.2%.
