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EMERGING MARKETS-Dollar, politics push emerging stocks and FX to weekly losses
October 14, 2016 / 10:12 AM / a year ago

EMERGING MARKETS-Dollar, politics push emerging stocks and FX to weekly losses

LONDON, Oct 14 (Reuters) - Emerging stocks rose on Friday but were set to end the week in the red while a strong dollar kept currencies under pressure, including China’s yuan which posted its biggest weekly loss since January.

Bangkok markets meanwhile steadied after days of volatility, with stocks rising 4 percent and the baht up half a percent as it looked likely that the death of Thailand’s revered king would not cause major economic disruption .

Emerging markets have come under pressure this week as a U.S. interest rate rise looks all but certain in December, pushing the dollar and U.S. yields to seven-month highs. That, along with poor Chinese trade data, has pushed MSCI’s emerging equity benchmark to three-week lows

The index bounced half a percent off those lows, buoyed by strong Chinese producer inflation numbers and oil prices staying above $52 a barrel, but it is down almost 1 percent so far in October after rising four straight months.

There was little respite however for emerging currencies as the dollar index surged 0.4 percent. China’s yuan firmed slightly but is down almost 0.8 percent for the week, pressured by the greenback and falling export revenues.

The Turkish lira fell 0.3 percent, staying just off record lows hit on Wednesday after the government signalled fresh plans to push through an executive presidential system.

It also sacked or suspended 109 military judges, extending a crackdown on alleged supporters of dissident cleric Fethullah Gulen whom Ankara accuses of masterminding the bungled July 15 coup.

The lira is set for a third week of losses to the dollar.

Credit Agricole strategist Guillaume Tresca attributed recent pullbacks to a mix of dollar strength and domestic risks.

“During the summer we saw a lot of inflows into high risk countries like Turkey and South Africa and we have the feeling that some non-EM specialist individuals had invested in these countries, underestimating the risks,” he said.

“Now they understand that there is some risk...My view is maybe now people understand that there is some risk in Turkey that’s why we’ve seen this gradual depreciation.”

South Africa’s rand and the Russian rouble steadied however in line with commodity and oil prices .

But the rand looked set for more weakness. Not only has Finance Minister Pravin Gordhan been asked to appear in court in connection with a tax probe, President Jacob Zuma has applied to court to stop the release of an anti-corruption investigation into his allies, the wealthy Gupta family.

These issues are likely to affect the country’s next credit rating review by Moody’s which may see its rating drop to junk.

Citi analysts said they had trimmed their overweight position in South African bonds and cut the rand to underweight in their model portfolio, citing “higher volatility, rising core yields, and the untimely re-emergence of local political risks.”

Eastern European stocks bounced half a percent after touching two-week lows in the previous session.

Emerging assets continued to draw in fresh money over the week, with JPMorgan data showing emerging bond and equity funds absorbing $714 million and $2.3 billion respectively. Year-to-date inflows now stand at $51.7 billion and $15.7 billion for the two sectors.

Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 895.94 +5.29 +0.59 +12.82

Czech Rep 891.38 +4.74 +0.53 -6.79

Poland 1734.87 +7.32 +0.42 -6.68

Hungary 28271.67 +148.46 +0.53 +18.19

Romania 6867.58 +8.89 +0.13 -1.95

Greece 586.48 +9.90 +1.72 -7.11

Russia 987.59 -0.40 -0.04 +30.45

South Africa 44584.84 +579.06 +1.32 -2.65

Turkey 76882.88 +72.57 +0.09 +7.19

China 3063.73 +2.39 +0.08 -13.43

India 27696.36 +53.25 +0.19 +6.05

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2016

Czech Rep 27.00 27.00 +0.01 +0.00

Poland 4.29 4.29 -0.02 -0.84

Hungary 305.39 305.00 -0.13 +3.03

Romania 4.50 4.50 +0.01 +0.47

Serbia 123.03 123.01 -0.02 -1.27

Russia 62.98 62.97 -0.01 +15.84

Kazakhstan 330.90 330.56 -0.10 +2.90

Ukraine 25.77 25.77 +0.00 -7.05

South Africa 14.29 14.25 -0.26 +8.22

Kenya 101.30 101.20 -0.10 +0.89

Israel 3.81 3.80 -0.34 +1.92

Turkey 3.09 3.08 -0.13 -5.57

China 6.72 6.72 +0.01 -3.45

India 66.74 66.78 +0.07 -0.81

Brazil 3.18 3.18 -0.03 +24.59

Mexico 18.94 18.92 -0.07 -9.32

Debt Index Strip Spd Chg %Rtn Index

Sov‘gn Debt EMBIG 355 -3 .01 7 66.71 1

For GRAPHIC on MSCI emerging index performance 2016, see

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Additional reporting by Adela Suliman; Editing by Toby Chopra)

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