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Emerging stocks poised for best week

London - Emerging-market stocks headed for their biggest weekly gain in six as a raft of economic data suggested China’s economy is stabilising.

The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong and the Shanghai Composite Index rose to four-month highs earlier in the week after Chinese exports beat estimates.

The gauges pared gains on Friday as figures showed gross domestic product matched estimates to increase 6.7% in the first quarter, while industrial output and retail sales picked up in March. Currencies climbed since April 8, led by Peru’s new sol.

Emerging-market assets have rallied to the highest levels in at least five months this year as commodity prices recovered and the Federal Reserve signalled it would go slow in raising interest rates. Friday’s figures suggest a stabilization of the economy and “we can expect less aggressive monetary policy easing” from the People’s Bank of China, Australia & New Zealand Banking Group said in a note.

“The market rally this week has been driven by expectations that investors can see some degree of stability in China,” said John Teja, a director at PT Ciptadana Securities in Jakarta. “Uncertainties over China’s economic fundamentals will remain despite the numbers we’ve seen today.

I still suggest clients hold more cash and wait for clear signs that things are really on track before buying more stocks.”

Brent crude rose 4.6% this week and is up almost 60% since mid-January and investors will be watching a producers’ meeting this week to see if the rally can be sustained. Nations representing about half the world’s oil production will gather in Doha to discuss freezing their output at January levels.

Russia, Saudi Arabia, Qatar and Venezuela already made a preliminary deal in February and are seeking to add more producers.

Stocks

The MSCI Emerging Markets Index of shares rose 0.1% in Hong Kong and climbed 3.7% this week, the most since the period ending March 4. Materials stocks led gains, advancing 5.9% since April 8, followed by a 4.6% increase in energy equities.

The Hang Seng China Enterprises Index increased 5.8% since April 8 and the Shanghai Composite Index climbed 3%. Siderurgica Nacional SA, Brazil’s biggest steelmaker, gained 39% this week, the most among 835 companies in the MSCI developing-markets gauge.
Currencies, bonds

The MSCI Emerging Markets Currency Index rose 0.2% on Friday, extending its advance this week to 0.8%.

The won strengthened 0.8% and advanced 0.5% for the week. The ringgit fell 0.2% and strengthened 0.1% since April 8. The new sol, Colombia’s peso, South Africa’s rand and Brazil’s real are all up more than 3% this week.

“China is showing a rebound in activities in the March month,” said Andy Ji, a Singapore-based foreign-exchange strategist and economist at Commonwealth Bank of Australia. “It’s definitely a positive for emerging-market currencies."

South Korean government bonds headed for their biggest weekly loss in six after a worse-than-expected showing by the ruling Saenuri party in parliamentary elections spurred speculation it would lessen the government’s ability to push for aggressive monetary stimulus.

The yield on the 10-year notes rose five basis points since April 8 to 1.85%, according to Korea Exchange prices.

Chinese bonds also fell this week, with the 10-year yield rising three basis points to 2.93%. Indonesian securities rose, pushing the similar-maturity yield down 13 basis points to 7.44%.

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