Emerging-Market Stocks Rally on China as Turkish Assets Tumble

LAGOS (Capital Markets in Africa) – Emerging-market equities climbed to a one-month high as China’s efforts to support its economy spurred a rally in risk assets.

MSCI’s gauge of stocks headed toward its best month since January, while seventeen of 24 developing-nation currencies advanced. South Africa’s rand gained after President Cyril Ramaphosa said he secured about $15 billion in Chinese investments, and Chile’s peso rose with copper. The Turkish lira sank to a record low as the central bank defied market expectations by keeping rates unchanged. The CSI 300 Index of Chinese stocks had its biggest three-day increase since mid-August 2016.

Traders boosted the value of emerging-market assets after Beijing unveiled a package of policies to increase domestic demand and support growth in the face of pro-tariff tweets from Donald Trump. On a separate trade issue, the president said Monday he’s approaching a “dramatic” deal with Mexico, without giving details. The Latin American nation is redoubling its efforts to reach a Nafta agreement with the U.S. and Canada by the end of August.

“It’s nice to have some positive EM headlines for a change,” said Greg Lesko, a money manager at Deltec Asset Management in New York. “We’ve expected China to step on the gas to help the domestic economy as it looks like we are in for a period of uncertainty regarding trade, so this is encouraging.”

Last quarter’s sharp selloff for emerging markets has left money managers divided, even as prices have shown some signs of recovery. While Goldman Sachs Group Inc. and BlackRock Inc. say rising corporate profits and strong fundamentals support developing-nation assets, Nomura Asset Management Company joined Morgan Stanley and Man GLG in urging caution.

“We have slightly reduced our bets,” said Shigeki Sakaki, the Tokyo-based chief strategist at Nomura, which oversees $422 billion. “Both emerging-market stocks and bonds will face difficulties over the next one year.”

Source: Bloomberg Business News