1. US dollar retreat lifts Emerging Markets assets, Turkey data gives strong boost

US dollar retreat lifts Emerging Markets assets, Turkey data gives strong boost

Dollar pullback helped emerging assets stabilise on Wednesday, with stocks flatlining after four days of losses, while a surprise current account surplus in Turkey provided a strong boost to stocks and the lira.

By: | Published: November 12, 2015 9:08 AM

A dollar pullback helped emerging assets stabilise on Wednesday, with stocks flatlining after four days of losses, while a surprise current account surplus in Turkey provided a strong boost to stocks and the lira.

Lacklustre Chinese industrial output data kept the pressure on Asia earlier. Hong Kong stocks were down 0.2 percent and mainland Chinese markets eked out meagre gains on hopes that slower growth would prod policymakers into more stimulus .

MSCI’s emerging index was flat as the dollar pulled away from seven-month highs hit against major currencies on expectations of a U.S. interest rate rise in December. Emerging currencies such as the rand and Turkish lira firmed around 0.7 percent against the greenback .

Istanbul stocks rose almost 1 percent after the current account showed a $95 billion surplus in September compared with a Reuters forecast of a $27 million deficit.

The August deficit too was revised to a surplus of $27 million, the first positive reading in Turkey since late 2009.

“The most significant move we’ve seen in the last 24 hours are signs of weakness in the dollar – maybe the market is taking a pause after the big moves we had in the wake of (U.S.) non-farm payrolls,” said Murat Toprak, EM strategist at HSBC.

“It’s too early to say there has been a change in market sentiment … But we have gone to some extreme levels and this retracement is normal.”

Toprak singled out the Turkish data as a big positive for Ankara, which will be hard hit if global borrowing costs rise.

“If the current account deficit narrows, it means Turkey is a bit less vulnerable, beyond the political factor,” he added, noting that another “deficit” country, South Africa, had posted stronger-than-expected manufacturing data this week.

India was shut for a holiday but the rupee firmed half a percent in offshore trade, thanks also to announcements freeing foreign investment in 15 major sectors. Coming after the ruling party’s defeat in state elections, the move appears to signal that reforms will continue.

“This is a continuation of the capital account liberalisation by the government, and we remain constructive on rupee assets,” Barclays analysts told clients.

Russian and Gulf stocks stayed weak as oil prices held near two-week lows but Riyadh managed to rise 1 percent thanks to a dividend plan from Saudi Telcom .

Egypt’s bourse, which has lost 9.5 percent in the past three days on fear of an impending currency devaluation, slipped a further 0.2 percent.

Also in Africa, Zambia’s kwacha rebounded more than 1 percent after falling 5 percent to record lows on Tuesday .

In central Europe, the Polish and Hungarian bourses rose half a percent though currencies stayed flat versus the euro .

Croatia’s kuna was flat, just off 10-day lows to the euro ahead of a central bank meeting that is unlikely to change interest rates. The currency has been wobbly after an inconclusive weekend election.

 

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