Oil declines amid signs rising global supply

Jakarta - Emerging-market stock volatility hovered near the highest level since June as traders awaited verdicts on monetary policy from the Federal Reserve and the Bank of Japan.

The MSCI Emerging Markets Index was little changed on Tuesday as gauges in the Philippines and Qatar gained at least 1% and measures in Russia and Thailand retreated.

South Africa’s rand extended its longest winning streak since June while the rouble fell the most among emerging-market peers as oil traded below $46 a barrel.

Hungarian bonds rallied for a third day as investors awaited details of the central bank’s easing measures.

Price swings in developing-nation equities have picked up in the past month as odds for the Fed to raise interest rates at its September meeting fluctuated from as low as 18% to as high as 42%.

Investors who ploughed money into emerging-market exchange-traded bond and stock funds in the past 16 weeks are waiting to see what US and Japanese policy makers will decide on Wednesday to determine the sustainability of the rally.

Shifting sentiment around the Fed and BoJ “is the driver of volatility right now,” said Tony Hann, the head of equities at Blackfriars Asset Management in London. Blackfriars, whose Oriental Focus Fund has outperformed 95% of peers this year, hasn’t changed its positioning before the decisions and doesn’t foresee US rates changing this year, Hann said.

The JPMorgan Chase & Company Emerging Market Volatility Index was at 10.84 on Tuesday, up from 9.96 on September 1. It rose as high as 10.88 last week, representing the biggest price swings since the week that followed Britain’s vote to leave the European Union.

Stocks

The MSCI Emerging Market Index traded 0.1% higher at 898.83 by 1:21 in London. The gauge is up 0.6% so far in September, setting it on course for its smallest monthly gain since it dropped in May.

A 13% rally in the measure this year has pushed the average valuation of its companies to 12.42 times estimated 12-months earnings, a 22% discount to the MSCI World Index of advanced-country stocks.

Six of the gauge’s 11 industry groups rose, while energy stocks led decliners as Brent crude slid 1.2% to $45.42 in London on speculation a global glut will be sustained amid rising supply from Nigeria.

South African oil and gas producer Sasol retreated 2% and Novatek OJSC slumped 3.5% in Moscow. Kommersant newspaper reported Russia is considering increasing its gas extraction tax rate.

Thailand’s SET Index ended a five-day rally. Some investors probably have “big concern” after foreigners began selling domestic equities on Monday, Tawatchai Asawapornchai, deputy managing director at ASL Securities, said by phone.

Currencies

The MSCI Emerging Markets Currency Index was little changed after rising 0.4% on Monday.
The rand appreciated 1.1%, bringing its five-day advance to 3.7%, the most among 24 developing countries. Russia’s ruble lost 0.5%.

The Hungarian forint weakened for a second day versus the euro. While Hungary’s policy makers kept the benchmark three-month deposit rate unchanged today, the central bank will announce details on a limit to the amount of deposits lenders can keep with it in an attempt to ease policy.

Bonds

The premium investors demand to own emerging-market debt over US Treasuries was little changed at 343 basis points on Tuesday, according to JPMorgan indexes. The spread widened 16 basis points last week.

Hungary’s local-currency bonds due in October 2027 rose, lowering the yield by five basis points to 2.79%. The yield on 10-year South African bonds fell three basis points to 8.59%.

 The probability that South Africa’s sovereign credit rating could be cut in November by Moody’s Investors Service is about a third, the company’s Vice President Zuzana Brixiova told reporters in Johannesburg on Tuesday.

Russian bonds slid for a third day on Tuesday, with yields on 2027 debt climbing six basis points to 8.34%.

The Bank of Russia said on Friday it wouldn’t cut interest rates for the rest of the year after reducing its benchmark by 50 basis points to 10% that day.