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EMERGING MARKETS-Emerging markets held back by Trump stimulus doubts
March 23, 2017 / 10:44 AM / 5 months ago

EMERGING MARKETS-Emerging markets held back by Trump stimulus doubts

LONDON, March 23 (Reuters) - Emerging equities steadied on Thursday, helped by modest gains in Asia as investors waited to see if U.S. President Donald Trump could push through a health bill to replace "Obamacare", opening the way for tax cuts.

Emerging assets have rallied hard this year on the back of Trump's promised fiscal splurge but stumbled on Wednesday after his healthcare bill stalled in Congress, raising doubts about his ability to implement the pledges.

"That called into question all the other relevant reforms that the market was pricing in," said Alejandro Alvaro, a global emerging market bond fund manager at Jupiter Asset Management.

MSCI's emerging equity index edged slightly higher, rising for the ninth day in the last 10, helped by gains in Asia and Russia as oil prices rebounded.

Emerging sovereign dollar bond spreads over U.S. Treasuries have narrowed by 56 basis points (bps) since the start of the year, and are currently trading at around 310 bps. After Wednesday's sell off they are at a one-week high.

"It's a moment for the asset class to have a reality check in terms of how much spreads have been driven by technicals and not fundamentals," Alvaro added.

Emerging markets remain broadly supported by economic data. South African government bond yields touched the lowest since October 2015, after data showed inflation slowing and the current account deficit at six-year lows

While most currencies stayed on the back foot against the dollar, the rouble gained 0.4 percent before Friday's central bank meeting that is expected by 15 out of 25 analysts in a Reuters poll to hold rates at 10 percent.

"We think the CBR will choose between a 'dovish on-hold' and a 'cautious 25 basis points cut', seemingly with nearly equal probability," ING Bank analyst Dmitry Polevoy told clients.

Other emerging European markets struggled, with Polish stocks down 0.25 percent, led by a 3.5 percent loss in the shares of utility PZU after the sacking of its chief executive.

Earlier, mainland Chinese stocks rose 0.35 percent as hopes resurfaced that MSCI would include A-shares in its emerging index.

The Czech crown's implied euro rate in the three-month forward market continued to retreat from the multi-year highs it hit earlier this week.

Nigeria's naira meanwhile weakened in the non-deliverable forwards market, after central bank sold dollars at a weaker naira rate to boost liquidity on the official market and narrow the naira's spread at the black market..

The six-month contract was at one-month lows, though it approached 400 per dollar a month ago.

For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 967.38 +0.41 +0.04 +12.19

Czech Rep 975.87 -3.04 -0.31 +5.89

Poland 2218.78 -5.06 -0.23 +13.91

Hungary 31941.07 +113.94 +0.36 -0.19

Romania 7958.63 -10.62 -0.13 +12.33

Greece 641.44 +0.79 +0.12 -0.34

Russia 1126.60 +3.43 +0.31 -2.23

South Africa 44815.38 -40.34 -0.09 +2.08

Turkey 89854.87 +45.77 +0.05 +14.99

China 3248.91 +3.69 +0.11 +4.68

India 29264.47 +96.79 +0.33 +9.91

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 27.02 27.02 +0.00 -0.04

Poland 4.27 4.28 +0.16 +3.10

Hungary 308.92 308.50 -0.14 -0.03

Romania 4.55 4.56 +0.10 -0.34

Serbia 123.83 123.85 +0.02 -0.39

Russia 57.56 57.77 +0.36 +6.43

Kazakhstan 315.48 315.48 +0.00 +5.76

Ukraine 27.07 26.90 -0.63 -0.26

South Africa 12.57 12.56 -0.10 +9.22

Kenya 102.75 102.80 +0.05 -0.37

Israel 3.65 3.64 -0.12 +5.63

Turkey 3.62 3.62 -0.07 -2.58

China 6.89 6.88 -0.12 +0.81

India 65.48 65.43 -0.08 +3.76

Brazil 3.09 3.09 +0.03 +5.42

Mexico 19.02 19.02 +0.03 +8.94

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 332 -1 .04 7 66.26 1

Editing by Tom Heneghan

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