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EMERGING MARKETS-Emerging stocks, FX fall, investors eye Czech cenbank
April 6, 2017 / 9:10 AM / 8 months ago

EMERGING MARKETS-Emerging stocks, FX fall, investors eye Czech cenbank

    By Claire Milhench
    LONDON, April 6 (Reuters) - Emerging stocks fell and
currencies weakened on Thursday after minutes from the U.S.
Federal Reserve clobbered risk appetite, while investors
monitored a Czech central bank meeting to see if it will abandon
the cap on the crown. 
    MSCI's benchmark equities index           fell 0.7 percent,
tracking losses in developed markets with bourses across Asia
and emerging Europe selling off. Hong Kong shares        fell
0.6 percent, Polish stocks          0.7 percent and Russian
dollar-denominated stocks         0.5 percent. 
    Currencies were also mainly on the backfoot with the Russian
rouble        retreating from a near 21-month high touched on
Wednesday while the Turkish lira        weakened 0.4 percent to
three-week lows.
    Sentiment soured overnight when minutes from the Fed's last
meeting showed most policymakers thought the U.S. central bank
should begin trimming its $4.5 trillion balance sheet later this
year, much earlier than many had expected.             
    Disappointing data added to the bearish mood, with activity
in China's services sector expanding at its weakest pace in six
months.              The yuan        dipped against the dollar
but Chinese shares                   ended at a four-month high,
bolstered by the government's plans for a new economic zone.
    In Europe, the focus was on a Czech central bank meeting to
find out whether policymakers would scrap the cap on the crown,
which prevents the currency from firming past 27 to the euro and
has been in place since November 2013.              
    Policymakers had pledged to keep the cap in place until the
end of March. According to a Reuters poll, the crown is expected
to gain 5 percent in 12 months.                
    The crown's implied rate in the one-month forwards
             market is trading at 26.9 per euro and in the
three-month forwards market              it is 26.7 per euro,
the highest since late 2013. 
    "It could happen at any time," said Kaan Nazli, senior vice
president at Neuberger Berman. "They have a pretty strong
balance sheet – they are producing current account surpluses -
and if you look at the fundamental value of the crown it has
been strengthening over the time that they have been keeping it
at a weaker point."             
    The South African rand        bucked the trend, firming 0.4
percent after the ruling ANC party rejected calls for President
Jacob Zuma to quit. The rand touched three-month lows on
Tuesday, pressured by political turmoil and a ratings downgrade
to junk.             
    A parliamentary motion of no confidence against Zuma has
been scheduled for April 18, but previous no confidence motions
have failed as the ANC has a commanding majority.             
    "It looks like the ANC is siding with the president but
clearly a lot of people and groups from the wider ANC coalition
are against the president..., which basically means the rest of
the year we will have continued headline risk," said Nazli.
    "There might be more rating downgrades down the line; it is
very likely that it could go to junk in three to six months from
now on the external rating."             
    Bonds remained under pressure, with the average yield spread
of South African sovereign bonds over U.S. Treasuries on the JP
Morgan EMBI Global Diversified index         rising 3 basis
points (bps) to 279 bps.
    Earlier in Asia, Indian stocks         retreated from record
highs ahead of a central bank meeting at which it is expected to
keep rates at 6.25 pct, according to a Reuters poll.
             
    India's services sector continued to recover in March from
the shock demonetisation, expanding at its fastest since
October.               

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              962.55    -6.67   -0.69  +11.63     
       
 Czech Rep                  978.33    -2.45   -0.25   +6.15     
       
 Poland                    2237.16   -16.48   -0.73  +14.85     
       
 Hungary                  32400.94    -4.19   -0.01   +1.24     
       
 Romania                   8215.04   +13.21   +0.16  +15.95     
       
 Greece                     669.01    -0.96   -0.14   +3.94     
       
 Russia                    1147.66    -4.83   -0.42   -0.41     
       
 South Africa             45843.20  -306.65   -0.66   +4.42     
       
 Turkey                   88775.35  -262.10   -0.29  +13.61     
       
 China                     3281.60   +11.29   +0.35   +5.73     
       
 India                    29874.31   -99.93   -0.33  +12.20     
       
            
 Currencies              Latest    Prev    Local    Local       
      
                                   close   currency currency    
       
                                           % change % change    
       
                                                    in 2017     
      
 Czech Rep                27.02     27.03   +0.06    -0.04      
     
 Poland                    4.24      4.23   -0.11    +3.93      
     
 Hungary                 310.32    310.21   -0.04    -0.48      
     
 Romania                   4.52      4.53   +0.09    +0.26      
     
 Serbia                  123.73    123.75   +0.02    -0.31      
     
 Russia                   56.40     56.31   -0.15    +8.63      
     
 Kazakhstan              312.59    311.66   -0.30    +6.74      
     
 Ukraine                  27.04     27.04   -0.00    -0.15      
     
 South Africa             13.73     13.79   +0.46    +0.00      
     
 Kenya                   103.15    103.11   -0.04    -0.76      
     
 Israel                    3.65      3.65   -0.09    +5.54      
     
 Turkey                    3.71      3.70   -0.39    -4.98      
     
 China                     6.90      6.89   -0.11    +0.63      
     
 India                    64.96     64.87   -0.14    +4.59      
     
 Brazil                    3.12      3.12   -0.06    +4.23      
     
 Mexico                   18.83     18.81   -0.07   +10.03      
     
            
 Debt                 Index   Strip Spd  Chg   %Rtn   Index     
       
 Sov'gn Debt          EMBIG   333         1    .03  7 70.38 1   
        
            

 (Additional reporting by Karin Strohecker)
  

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