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Emerging assets rise after FBI statement

Nov 07 2016 11:51
Narayanan Somasundaram and Liau Y-Sing

Kuala Lumpur - Mexico’s peso led emerging-market currencies higher and stocks rebounded after the Federal Bureau of Investigation reaffirmed that Hillary Clinton’s use of private email servers wasn’t a crime, days before voters decide whether she should become US president.

The peso, considered a barometer for investors’ views on her Republican rival Donald Trump’s chances in the election, jumped 2.3 percent, the most among 24 emerging-market currencies. 

The rand surged and Turkey’s lira climbed from a record low. A gauge of developing-nation equities had its steepest increase in almost three weeks. Egyptian stocks extended its rally for an eighth day, while Hungarian shares reached a record high after the country was returned to investment grade by Moody’s Investors Service.

Emerging assets are rebounding in the final stretch of the US presidential election campaign following back-to-back weekly losses. The FBI is sticking to its July conclusion that Democratic contender Clinton’s handling of her emails as secretary of state wasn’t a crime, the bureau’s director James Comey said after examining new material.

Comey informed Congress just over a week ago the FBI was looking at fresh e-mails potentially related to Clinton, a statement that roiled the presidential race and breathed new life into Trump’s candidacy at a time most polls showed Clinton with a wide lead.

“The FBI announcement over the weekend has been positive for risk sentiment,” said Divya Devesh, a foreign-exchange strategist at Standard Chartered in Singapore. “Given that we are quite close to the US election now, investors might still exercise some caution given the uncertainty.”


The MSCI Emerging Markets Currency Index added 0.1% as of 10:10. The lira climbed 0.4% and the rand strengthened 0.5%.

South Korea’s won gave up earlier gains to trade little changed. The currency slumped to a four-month low last week amid an influence-peddling scandal involving President Park Geun-hye. It sank to 1 152.20 to the dollar on November 2, the lowest since July, as she faced calls from the public to resign over allegations her long-time friend Choi Soon-sil meddled in government affairs.

Malaysia’s ringgit declined 0.3%, while Thailand’s baht slipped 0.2%. Indonesia’s rupiah lost 0.1%. The country’s economy grew in line with economists’ forecasts in the third quarter, government data on Monday showed. China’s yuan fell 0.3% after the central bank weakened its reference rate.

“US political uncertainty ahead of Tuesday’s presidential elections will continue to generate dollar volatility as most swing-state polls suggest the election outcome will be a close call,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney.

South Korea’s government bonds retreated, with the yield on 10-year notes rising one basis point to 1.71%.

The two-year yield, the most sensitive to the policy outlook, climbed one basis point to 1.51% ahead of a review on Friday where the central bank is forecast to keep interest rates unchanged. China’s 10-year yield climbed four basis points to 2.77%, the highest since September.


The MSCI Emerging Markets Index rose 1%, its first increase in five days, led by health-care companies and technology shares. Taiwan’s Taiex surged 1.3%, paced by Taiwan Semiconductor Manufacturing, while gains in Samsung Electronics Co. lifted South Korea’s Kospi index higher by 0.8%. Indian shares rebounded 0.9%, halting a five-day drop.

The developing-markets measure has rallied 12% this year and is valued at 12 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index is little changed in 2016 and trades at a multiple of 15.4.

 The Shanghai Composite Index rose 0.3% to a January high. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong climbed 1.2%. Hong Kong developers tumbled after city’s government took steps to cool the world’s least affordable home market. 

Political risk may also weigh on Hong Kong shares this week after China’s top legislative body ruled that Hong Kong people who advocate independence can’t hold public office, a rare intervention that appears to bar two elected localists from retaking their oaths and could spark unrest.

Egypt’s EGX 30 Index surged 5.3% toward the highest level since February 10, 2015, extending its gain over eight days to 19%. Stocks have rallied amid bets a decision to float its currency will help cement a $12bn loan from the International Monetary Fund.  

Thai shares advanced 0.9%, halting three days of losses. The Philippine Stock Exchange Index is the only decliner in Asia. It fell 0.4%, extending last week’s 2.4% loss. Globe Telecom tumbled 5.2% in Manila after its third-quarter net income slumped by 50%.

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