Emerging Assets Resume Rally on Fed as Samsung Surges to Record

LAGOS, Capital Markets in Africa: Emerging-market currencies rebounded and a gauge of stocks rose to a one-year high as Federal Reserve minutes tempered speculation U.S. interest rates will rise this year, spurring demand for riskier assets.

South Africa’s rand led currencies higher as Russia’s ruble and Malaysia’s ringgit gained with crude oil. South Korea’s won rose after its worst one-day loss in almost two months. Equities from Indonesia, Thailand to Turkey and India gained. Tencent Holdings Ltd. jumped to an all-time high in Hong Kong after an earnings surprise and Samsung Electronics Co. surged to a record in Seoul, sending the MSCI Emerging Markets Index to its first gain in three days.

Developing-market assets are resuming their rallies that were underpinned by a rebound in commodities and bets that the biggest economies will continue with looser monetary policy. The record of the Federal Open Market Committee’s July meeting showed policy makers saw little prospect of a sharp increase in price pressures, a day after New York Fed President William Dudley flagged the possibility of a tightening as soon as next month.

“The FOMC minutes were more dovish than expected,” said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “After Dudley’s comments, markets were looking for a stronger dollar and hawkish Fed, but that’s not what was revealed in the minutes.”

Most policy makers “saw relatively low risk that a further gradual strengthening of the labor market would generate an unwanted increase in inflationary pressures,” according to the minutes of the July meeting published Wednesday in Washington.

Odds of an increase in U.S. borrowing costs by year-end currently stand at 49 percent, down from 51 percent on Tuesday, according to futures prices compiled by Bloomberg.

Currencies, Bonds
The MSCI Emerging Markets Currency Index advanced 0.2 percent at 9:05 a.m. in London, after retreating 0.5 percent on Wednesday. The measure is headed for a 1.7 percent increase this month, the most since June. 

The rand advanced 0.7 percent, its second day of increases. The wonstrengthened 0.2 percent after sliding 1.5 percent Wednesday, according to prices from local banks compiled by Bloomberg. The ringgit and ruble added at least 0.4 percent after oil rose for a sixth day, helping support the nations that rely on energy exports.

The Philippine peso climbed 0.3 percent after data showed the nation’s economy grew faster than expected in the second quarter.

Most Asian bonds gained. The yield on 10-year bonds of Taiwan and South Korea fell three basis points and two basis points, respectively to 0.63 percent and 1.42 percent. The rate for similar-maturity notes was down three basis point for Indonesia at 6.81 percent. India’s was up three basis point at 7.14 percent, while that of Malaysia increased two basis points to 3.52 percent.  

Stocks
The MSCI Emerging Markets Index of stocks rose 0.8 percent to 916.81. The measure is up 15 percent this year and trades at 12.6 times its 12-month projected earnings. The MSCI World Index of developed-nation stocks has increased 4.2 percent in 2016 and is valued at a multiple of 16.3.

All 10 industry groups in the developing stocks gauge climbed, led by an index of technology companies, which rallied to the highest level since May 2015. Tencent surged 5 percent and Samsung advanced 4.7 percent. Both stocks were the biggest contributors to gains in the emerging share measure.

Samsung kept up its winning streak, defying shaky global smartphone demand and increasingly hard-charging Chinese rivals. The success of its latest flagship Galaxy phones has fueled a 30 percent rally this year, outpacing Apple Inc.’s roughly 4 percent gain. The rally in the Korean company drove the nation’s benchmark Kospi index to its highest close in a year.

The Hang Seng China Enterprises Index of mainland Chinese shares traded in Hong Kong climbed 0.1 percent, while the Shanghai Composite Index declined 0.2 percent. Indonesia’s Jakarta Composite Index rose 1.4 percent after a holiday on Wednesday. Thailand’s SET Index advanced 1.1 percent while equities in South Korea and India climbed 0.6 percent each.

Source: Bloomberg Business News