LONDON May 19 Emerging equities steadied on
Friday with offshore-listed Brazilian assets clawing back ground
after posting hefty losses on Thursday, when political turmoil
in Brazil and the United States prompted a broad-based sell off.
Brazilian assets plummeted on Thursday after allegations
that President Michel Temer condoned bribes to silence a key
witness in a corruption probe, deflating investor optimism about
the prospects for his ambitious pension and labour reform
agenda. Temer has refused to resign.
However, London-listed Brazil exchange traded funds
rebounded on Friday, with the iShares MSCI Brazil up
1.5 percent, and HSBC's MSCI Brazil and DBX MSCI Brazil
up 2 percent.
Brazilian stocks are down 9.7 percent so far for the
week, after falling 8.7 percent on Thursday - their biggest
one-day drop since the 2008 financial crisis. The real
steadied on Friday after tumbling more than 7 percent against
the dollar on Thursday, its biggest daily decline since 2002.
The average yield spread of Brazilian sovereign bonds over
U.S. Treasuries on the JP Morgan EMBI Global Diversified was
trading at 295 basis points (bps), after blowing out to 297 bps
on Thursday - its widest since January.
"It is very worrisome for Brazil... this is a very serious
thing," said Alejo Czerwonko, director of emerging markets
investment strategy at UBS, though he added that the potential
for contagion for other emerging markets was limited.
"Countries like Argentina, that are highly linked to Brazil
are also being affected, but the EM rally will depend on
different factors...We're talking about impeachment in the U.S.
The broader emerging markets complex has been clobbered by a
ballooning political crisis in Washington this week, with
reports that President Donald Trump tried to interfere with a
federal investigation into his campaign's links with Russia.
"Europe is not fully out of the woods yet either," Czerwonko
said. "If there's anything the last year has taught us it's that
political uncertainty is not an EM specific phenomenon."
MSCI's benchmark emerging equities rose 0.5
percent on Friday after falling 2 percent on Thursday, its
biggest one-day loss since November. However, the index was on
track for a weekly fall of 1 percent - its first decline after
four straight weeks of gains.
Amongst the strongest performers on the day were Russian
dollar-denominated stocks which gained 0.9 percent,
helped by a 1.2 percent rise in oil prices.
Indonesian stocks leapt 3 percent to hit a record
high in their biggest one-day gain since August 2016, after
ratings agency S&P upgraded the sovereign's bond rating to
investment grade from junk.
The Indonesian rupiah firmed 0.25 percent against the
dollar, rebounding from a four-month low.
With the dollar down 0.4 percent against a basket of
currencies, emerging currencies gained across the board.
The Turkish lira firmed 1 percent, whilst
commodity-related currencies were supported by gains in oil,
copper and gold. The rouble
firmed 0.8 percent, the Kazakhstan tenge 0.5 percent and
the South African rand around 1 percent.
The Mexican peso also strengthened 0.2 percent
against the dollar after the central bank unexpectedly hiked its
key interest rate on Thursday by 25 basis points in an attempt
to check inflation. At 6.75 percent, the rate is
now at its highest level since March 2009.
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
Emrg Mkt Indx 992.05 +3.67 +0.37 +15.05
Czech Rep 1015.86 +4.15 +0.41 +10.23
Poland 2303.55 +8.41 +0.37 +18.26
Hungary 34734.16 +205.31 +0.59 +8.53
Romania 8468.70 +38.37 +0.46 +19.53
Greece 790.70 +7.87 +1.01 +22.85
Russia 1085.74 +8.94 +0.83 -5.78
South Africa 47883.86 +114.43 +0.24 +9.07
Turkey 95147.34 -577.62 -0.60 +21.77
China 3090.93 +0.79 +0.03 -0.41
India 30476.51 +41.72 +0.14 +14.46
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 26.54 26.56 +0.07 +1.75
Poland 4.20 4.21 +0.25 +4.77
Hungary 308.98 309.46 +0.16 -0.05
Romania 4.56 4.57 +0.16 -0.53
Serbia 122.90 122.95 +0.04 +0.37
Russia 57.11 57.52 +0.71 +7.27
Kazakhstan 312.17 313.66 +0.48 +6.88
Ukraine 26.35 26.39 +0.15 +2.47
South Africa 13.29 13.42 +0.98 +3.32
Kenya 103.30 103.30 +0.00 -0.90
Israel 3.59 3.59 +0.05 +7.25
Turkey 3.59 3.62 +0.82 -1.89
China 6.89 6.89 -0.03 +0.77
India 64.83 64.87 +0.06 +4.80
Brazil 3.37 3.37 -0.06 -3.42
Mexico 18.77 18.82 +0.25 +10.34
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 329 -1 .02 7 80.48 1
(Additional reporting by Dion Rabouin in New York; Editing by