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Jakarta - Emerging-market stocks and currencies pared the week’s gains amid mixed signals coming out of China over the health of the world’s second-largest economy.
The advances in measures of developing-nation shares and exchange rates this month are a fraction of what they were in March, suggesting a rally that drove the gauges beyond this year’s highs may be running out of steam.
While Chinese data ranging from manufacturing to exports and factory output have shown improvement, a resurgence in lending and an increase in defaults are causing uncertainty among investors. The Shanghai Composite Index is set for its worst week since a January rout shaved almost $6trn off global stocks.
“Investor sentiment remains weak as there are still some uncertainties over China,” said Indra Mawira, an investment manager who helps oversee 12 trillion rupiah of assets at Panin Asset Management in Jakarta. “Emerging markets gained strongly and some investors might decide to lock-in gains and wait for more signs from the first-quarter numbers to see if the rally can be justified.”
Equities tracked the US lower on Friday after the Standard & Poor’s 500 Index fell from a four-month high amid a mix of corporate earnings. Interest-rate futures show less than a 50% chance the Federal Reserve will add to its monetary tightening at its meetings in April, June and July, although the odds have risen from a week ago.
The outlook for a slower pace of rate increases has supported demand for emerging-market assets in the past few months.
Developing nations have been a beneficiary of a pickup in commodities. Brent crude held above $45 a barrel, after climbing through $46 on Thursday for the first time since November. The price is up 4.8% this week and 14% in April. The Bloomberg Commodity Index rose 3.9% from April 15, the biggest increase since early March, and is headed for a 6% advance this month.
Stocks
The MSCI Emerging Markets Index of shares fell 0.6% to 848.40 as of 08:00. That trimmed this week’s gain to 0.2%, compared with a 3.7% rally through April 15. The gauge is up 1.4% in April, slowing from a 13% advance in March.
All 10 industry groups retreated on Friday, led by a 1% loss in industrials and a 0.9% drop in information technology stocks. The measure is trading at 12 times projected 12-month earnings, compared with 16 for the MSCI World Index of shares. The gauges have climbed 6.9% and 1.7%, respectively, this year.
The Shanghai Composite dropped as much as 0.9% before paring the loss. It was last down 0.1% and 4.7% for this week, the steepest slide since a more than 6% plunge in the last week of January. Of the more than 1 000 members, in excess of 400 stocks fell on Friday. The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong declined 1.3%, taking the week’s loss to 1%.
Currencies
The MSCI Emerging Markets Currency Index fell 0.2%, cutting its weekly gain to 0.4%. It has climbed 0.3% in April, slowing from March’s 5.2% increase. South Korea’s won and the Malaysian ringgit led Friday’s losses. Still, the won was headed for a fourth weekly gain, along with the Thai baht.
The Bank of Thailand has helped limit volatility in the baht, which has strengthened in line with other Asian currencies because of capital inflows, Finance Minister Apisak Tantivorawong told reporters on Friday.
Across developing countries this week, the rand, Colombian peso and the Turkish lira led gains. The Argentine and Philippine pesos dropped the most along with Russia’s rouble.
