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Emerging stocks extend one-year high

Johannesburg - Emerging-market stocks extended gains to a one-year high as advances in crude oil stoked risk appetite and surging turnover helped drive a rally in Chinese equities.

Russia’s ruble led currencies higher.

The MSCI Emerging Markets Index rose for an eighth day after capping a fifth weekly advance, as financial and energy companies have paced increases among industry groups. Speculation of more property takeovers lifted Chinese stocks in Shanghai to a seven-month high.

The ruble climbed toward a three-week high and Malaysia’s ringgit and the rand halted two days of losses. The Thai baht strengthened after data showed the nation’s economy grew more than estimated. Korean and Indian markets are shut for holidays.

Developing-nation stocks are extending the longest streak of weekly gains since 2014 as crude’s recovery and optimism that central banks of the biggest economies will take steps to stem slowing growth buoy riskier assets. Traders see a 42% chance that the Federal Reserve will raise interest rates this year, futures trading data show, down from 49% on Thursday. Valuations in the regional equities gauge are at the most expensive level in 15 months.

“We are at a tricky juncture for Asian markets now and we will be watching keenly how markets settle following the recent gains,” said Mixo Das, a Singapore-based strategist at Nomura. “We are looking to take profits now and we have gone neutral on Asian equities.”

Japan’s economy grew less than was forecast in the second quarter, according to data on Monday, while reports last week showed sales at US retailers were little changed in July and wholesale prices unexpectedly fell by the most in almost a year.

The MSCI emerging-markets gauge climbed 0.4% to 913.50 at 09:13 in London. Its relative strength index is at 76 on Monday, the sixth day that it’s been above the 70 level that signals to some that gains may be overdone.

Seven out of 10 industry groups in the developing-nations stock measure rose. Tencent, a Chinese Internet firm, added 1.8% in Hong Kong, providing the biggest contribution to gains in the regional gauge. Hong Kong’s Hang Seng China Enterprises Index increased 1.6% to the highest level this year.

The Shanghai Composite jumped 2.4% as a measure of real estate companies capped its steepest two-day rally in almost a year after stake purchases by China Evergrande Group fuelled optimism of more mergers. Shares in Shenzhen rallied after a report said details of a delayed exchange link with Hong Kong will be announced shortly.

Stock indexes in Malaysia, Thailand and the Philippines rose. The Jakarta Composite Index slid 1.3%, its fifth day of losses, amid valuations near the highest level since 2007. Data on Monday showed Indonesia’s exports in July trailed estimates.

Currencies, bonds

The MSCI Emerging Markets Currency Index climbed 0.1%, reversing an earlier decline. The measure reached the highest in more than a year last week. Its relative strength index was almost 70 on Friday.

“From a valuation perspective, people are hesitant in pushing emerging-market currencies higher,” said Andy Ji, a currency strategist in Singapore at Commonwealth Bank of Australia. “The equity performance in emerging markets was five weeks on a winning streak.”

China’s yuan declined 0.1% as weaker-than-expected data reignited concern over growth in the world’s second-largest economy. The baht appreciated 0.5%. Thailand’s gross domestic product expanded 3.5% in the three months through June from a year earlier as the military government accelerated spending on road and rail projects to help offset weak demand for the nation’s exports.

Malaysia’s 10-year bond yield had the biggest drop, falling five basis points to 3.49% after economic growth slowed for a fifth quarter. The rate for similar-maturity bonds for Singapore declined three basis points to 1.73%. In Indonesia and Thailand, the yields were up one basis point at 6.8% and 2.0%, respectively.

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