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Bangkok - Emerging-market stocks headed for the longest winning streak since April 2015 and currencies strengthened as oil near a one-month high and optimism that the US will keep borrowing costs low for longer stoked appetite for riskier assets.
The MSCI Emerging Markets Index rose for a ninth day toward the highest level since July 2015 as Indonesia and Malaysia led gains, while a gauge of mainland China companies traded in Hong Kong reached the highest level this year.
South Korean shares resumed trading after a holiday, climbing for an eighth day in the longest stretch of advances since 2011. Taiwanese stocks slid, with valuations near a September 2014 high. The South Korean won led a measure of currencies higher.
Developing-nation shares have soared 33% from a January low, driving valuations to the highest level in 15 months.
A commodities rebound and bets that some of the largest economies will take measures to support growth with stimulus and lower borrowing costs have spurred demand for higher-yielding assets. Overseas investors have plowed almost $6bn into equities this month in India, Indonesia, the Philippines, South Korea, Taiwan and Thailand, data compiled by Bloomberg show.
“Foreign funds are still flowing into emerging markets because of surplus liquidity in the global financial system,” Koraphat Vorachet, an investment strategist at Capital Nomura Securities, said by phone from Bangkok.
“Still, valuations are probably quite stretched after the recent rally. Investors should be ready to sell some of their investments to lock in profit.”
Investors have trimmed bets that the Federal Reserve will raise interest rates in 2016 after stagnant retail sales data last week revived doubts about the strength of the US recovery.
Stocks
The MSCI Emerging Markets Index climbed 0.1% to 917.14 at 07:42, bringing its nine-day gain to 5.7%. As stocks climb, a technical indicator is signaling the rally may be overdone. The MSCI gauge’s 14-day relative strength index was at 77 on Tuesday, the highest since April 2015 and the seventh day above the 70 level that some technical analysts say indicates the measure is set to reverse direction.
Seven out of 10 industry groups in the developing-nations equity index rose, led by technology and health-care companies. The Jakarta Composite Index climbed 0.9%, while the FTSE Bursa Malaysia KLCI Index gained to the highest level since April 25. Taiwan’s Taiex index declined 0.7%, its second day of losses.
Hong Kong’s Hang Seng China Enterprises Index added 0.1%, its ninth day of gains, while the Shanghai Composite Index retreated 0.5%, falling from the highest close since January 8. Chinese shares - whether listed at home, in Hong Kong or in the US - are among the world’s best performers in August as fears of a hard landing in the world’s second-largest economy recedes and the yuan stabilises.
Currencies
The MSCI Emerging Markets Currency Index added 0.1% and has risen 1.7% this month. The won appreciated 0.9%, its first increase in three days, while Malaysia’s ringgit and the Taiwan dollar advanced 0.4%. South Africa’s rand strengthened for a second day.
South Korea’s 10-year bonds rose, with the yield dropping one basis point to 1.4%, while Thailand’s was up one basis point at 2.06%.
“We expect Asian currencies to remain strong although the scope for upside is not homogeneous,” said Julian Wee, a senior market strategist at National Australia Bank in Singapore.
“The Chinese yuan has more upside potential, along with the Indian rupee as appetite for yield remains high. The Malaysian ringgit and the Indonesian rupiah could also advance a little given the strength in the price of oil.”
