Chinese stocks seesawed on Wednesday, buoyed by fresh stimulus hopes but knocked by MSCI’s decision not to include them in its indexes, while other emerging markets received respite from a slight pullback in the dollar.
Chinese stocks ended 0.2 percent lower after wild swings following an announcement by index provider MSCI that it would not yet include mainland-listed shares in its equity benchmarks . But the market rose more than 1 percent at one point as cuts to central bank growth forecasts fuelled hopes of more stimulus .
Broader emerging markets, which are under pressure from U.S. bond yields at eight-month highs and the possibility of a U.S. rate rise this year, enjoyed a tentative bounce as the dollar index fell half a percent. Also, the yen, whose weakness has weighed on many Asian currencies, rose after hawkish central bank comments.
That helped the won climb 1 percent, its biggest one-day gain in three months, while the Singapore dollar and Malaysian ringgit firmed 0.4 percent .
“We are getting some dollar weakness after a period of strength following the payrolls (data last week). If retail sales tomorrow are strong, that will cement expectations of a rate hike in September, and I suspect we will see a renewed dollar bounce and sell-off in emerging markets,” said Neil Shearing, head of emerging markets at Capital Economics.
The lira bounced half a percent, rising off record post-election lows hit on Monday when it became clear Turkey was headed for a coalition government.
Turkish Stocks jumped 1.3 percent, rising off eight-month highs as markets were boosted by forecast-beating first-quarter growth data.
But Shearing saw gains as short-lived.
“The breakdown is not reassuring, it shows more consumption, lower savings and a wider current account deficit. It’s given a bit of boost to markets today, but the election and what happens next will cast a long shadow over the economy.”
The rouble jumped 2.7 percent as oil prices rose. Central European currencies extended gains, led by a 0.6 percent rise in the zloty versus euro after above-forecast inflation data.
Frontier market Pakistan rose 0.2 percent to four-month highs after MSCI put it on review for an upgrade to EM status .
“(Pakistan) is a reform story like India, but is actually delivering on reform while (India) is still struggling. The budget deficit has been slashed, subsidies are being reduced and privatisation is under way,” Renaissance Capital said.
“We expect investors to buy into the best undiscovered reform story in the emerging and frontier world.”
Also in frontier markets, Gabon sold a $500 million 10-year bond at 6.95 percent, with bids topping $2.75 billion.