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Mumbai - The longest winning streak in emerging-market stocks since April is showing signs of strain amid elevated valuations as investors await details on stimulus in major economies. South Korea’s won led developing-nation currencies higher.
The Shanghai Composite Index retreated amid signs that recent gains were excessive, while equity gauges in Indonesia and Malaysia halted three days of gains.
Vietnam’s stock index extended its rally from a 2008 high, Philippines shares headed for a 15-month high and Thai shares climbed toward the highest close in a year.
A measure of currencies rose to a May high as the won strengthened after the nation’s central bank held interest rates steady. Malaysia’s ringgit climbed for a fourth day.
Emerging-stock valuations are trading at the most expensive levels in more than a year amid a six-day rally in the regional benchmark gauge.
Investors are ploughing money into developing markets amid bets that some of the biggest economies will take measures to stem the fallout from Britain’s vote to leave the European Union.
The Bank of England is seen cutting borrowing costs on Thursday, while investors await details of Japan’s stimulus plans.
"Sentiment has been better these days but markets have run up so investors may take some profits," Ang Kok Heng, the Kuala Lumpur-based chief investment officer at Phillip Capital Management, said by phone.
"Investors are looking for better policy measures in major economies."
Stocks
About 270 stocks fell and 215 rose on the MSCI Emerging Markets Index, which added 0.1% to 857.58 as of 12:35 p.m. in Hong Kong, the smallest gain this week. The gauge has advanced 8.1% this year and trades at 12.2 times its 12-month projected earnings.
The MSCI World Index of developed markets has increased 1.9% and is valued at a multiple of 16.2.
Five out of 10 industry groups in the developing-nations equity index rose, led by material and technology shares. China Steel Corporation jumped 4.6% in Taipei before an announcement of an increase in prices.
Vietnam’s stock index climbed for a third day, sending valuations to the highest levels since 2009. The Jakarta Composite Index retreated 0.5% and the FTSE Bursa Malaysia KLCI Index slipped from a one-month high. Hong Kong’s Hang Seng China Enterprises Index dropped for the first time in four days.
The Shanghai Composite declined 0.4% from a three-month high after the benchmark gauge’s 14-day relative-strength index on Wednesday climbed above the 70 threshold that some traders see as a signal that a rally is about to reverse.
China is set to report second-quarter gross domestic product data Friday, with economists predicting an expansion of 6.6%, which would be the slowest since 2009.
Currencies, bonds
The MSCI Emerging Markets Currency Index climbed 0.2% after dropping 0.1% on Wednesday. The Polish zloty gained 0.4% and the ringgit appreciated 0.3%, followed by the Philippine peso at 0.2% The Indian rupee added 0.1% to touch a one-month high.
“Asian currencies are mostly higher on the back of strong foreign inflows as investors continue to chase yield,” said Khoon Goh, head of Asia research in Singapore at Australia & New Zealand Banking Group. “Expectations of further stimulus from major central banks in the developed world are helping risk appetite.”
The won rose 0.5%. The seven-day repurchase rate was left unchanged at a record low 1.25%, as forecast by all 20 economists in a Bloomberg survey.
South Korea’s central bank also cut its projection for economic growth and inflation amid an uncertain economic outlook.
Malaysian bonds extended their rallies with the yield on notes due November 2026 falling five basis points to 3.55%. It had slipped nine basis points on Wednesday after Bank Negara Malaysia lowered the overnight policy rate to 3% from 3.25%.
Goldman Sachs Group, alone among the 18 economists surveyed, had projected the move.
