China stocks lead gains on recovery hopes; S.African rand slides
Emerging market stocks rose on Monday, with mainland China stocks leading gains on hopes of economic recovery as the country eases strict COVID-19 restrictions and reopens borders, while most currencies fell against the dollar.
Currencies of the developing world edged lower against a dollar attempting to regain momentum. An index of EM currencies retreated from a nine-month high and was on track to break a 15-session winning streak – a run not seen in at least a decade.
South Africa’s rand slumped 1.6% to 17.06 per dollar.
“The rand’s short term retracement from overbought territory might also be some reflection on continued power struggles in the country and its ongoing stress to business and ultimately local GDP,” said Shaun Murison, senior market analyst at IG, referring to struggling power utility Eskom implementing the highest level of power cuts until further notice.
Inflation and retail sales data due this week will be eyed for more clues on the economy’s standing.
“A short term range for the USD/ZAR is currently considered between levels R16.70/$ and R17.40/$.”
MSCI’s index of emerging market shares scaled a fresh seven-month high, up 0.1%. The index is looking to mark its 10th straight session in the black, having gained nearly 8% over the last nine.
Trading volumes were seen thinned by a market holiday in the United States.
Heavyweight Chinese blue-chips rose 1.6% after Chinese health officials said COVID-19 infections in the region likely peaked.
Investors ditched Chinese domestic bonds for stocks as China’s central bank stepped up liquidity injections on Monday. The yuan currency strengthened past the psychologically important 6.7 per dollar as it benefited from continued capital inflows.
Eyes will now be on China’s economic growth and retail sales data this week.
Sentiment has also been buoyed of late by rising bets that the U.S. Federal Reserve will opt for a smaller interest rate hike at its upcoming meeting.
Emerging markets-focused asset manager Ashmore reported a 2% increase in assets under management in the last three months of 2022, driven especially by inflows into corporate debt. Ashmore expects investor risk appetite to increase over the course of the next 12 months.
Hong Kong’s tech and property stocks, some central European as well as Indian shares were among the decliners on Monday.
In central Europe, currencies of Hungary and Poland led losses, down 0.5% and 0.1% against the euro amid worries about European Union funds. For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX
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