Market Watch: Emerging Assets Rally Fourth Day Amid Bull Market in Commodities

LAGOS, Nigeria, Capital Markets in Africa: Emerging-market stocks rose for a fourth day with currencies as a surge in commodities boosted the outlook for exporting nations along with signs U.S. interest-rate increases will be gradual.

Philippine shares climbed to a one-year high, Korean equities jumped and a gauge of Chinese mainland companies traded in Hong Kong capped its longest winning streak since April 2015. The MSCI Emerging Markets Index was poised for the steepest gain in almost two months. The won led currencies higher, advancing the most since 2010 as trading resumed after a holiday in Seoul. Malaysia’s ringgit and Indonesia’s rupiah strengthened, while South Africa’s rand headed for its longest stretch of gains since March 2014.

Commodities entered a bull market as oil traded near the highest close in 10 months. Federal Reserve Chair Janet Yellen said gradual interest-rate increases are appropriate, diminishing the odds of a move in June or July. While developing-nation stocks surged 0.9 percent Monday on prospects of borrowing costs staying lower for longer following weak U.S. jobs data, Chinese reports this week that are expected to show a deeper slowdown in the world’s second-biggest economy could stall the rally in emerging markets.

“The commodities rally has given a boost to investor sentiment. We are bargain hunting now,” Jason Chong, chief investment officer at Manulife Asset Management Services Bhd., which manages 7 billion ringgit ($1.8 billion) in assets, said by phone in Kuala Lumpur. “Fed watchers would be looking at other indicators more closely after the weak jobs data. The question would be whether it is a one-off.”

The odds of a U.S. rate increase by July fell to 22 percent from more than 50 percent a week ago, according to Fed futures trading.

Stocks 
The MSCI Emerging Markets Index rose 1.5 percent to 835.79 at 9:07 a.m. in London, set for the steepest gain since April 13. All 10 industry groups advanced, paced by materials shares. Posco, a South Korean steelmaker, rallied 6.9 percent. Malaysian palm-oil producer Felda Global Ventures Holdings Bhd. surged 10 percent, the most among developing-market equities. Samsung Electronics Co. rose to a one-month high in Seoul.

The developing-nations equity measure has increased 5.3 percent this year and trades at 12.2 times its projected 12-month earnings, the most expensive level in a year. The MSCI World Index has advanced 1.8 percent in 2016 and is valued at a multiple of 16.2.

The Philippine Stock Exchange Index rallied 1.5 percent after overseas investors bought the nation’s equities for a ninth day in the longest streak since February 2015. Hong Kong’s Hang Seng China Enterprises Index rose 1.6 percent, its eighth day of increases. The Shanghai Composite Index added 0.1 percent before the scheduled release of foreign-reserves data.

South Korean stocks jumped 1.3 percent, the most since April 14, while Taiwanese equities climbed 1 percent. Indonesian shares rallied toward the highest level in 11 months, while India’s stock gauge was set to close at an October high. Stock gauges in Dubai, Turkey, South Africa and Russia climbed at least 0.7 percent.

Currencies 
The MSCI Emerging Markets Currency Index added 0.3 percent, its fourth day of gains, set for the highest close since May 12. The ringgit and rupiah strengthened at least 0.5 percent, while the won jumped 1.8 percent.

“Emerging-market currencies are doing pretty well. This is still the fallout from the payrolls and the fact that Yellen’s speech yesterday was interpreted as relatively neutral to dovish,” said Mitul Kotecha, the head of foreign-exchange and interest-rate strategy at Barclays Plc in Singapore. “That has weighed on the dollar and resulted in Fed rate-hike expectations being pushed back.”

India’s rupee strengthened 0.3 percent, its fourth day of gains, set for the longest winning streak in two months. Central bank Governor Raghuram Rajanleft interest rates unchanged, a move predicted by all 44 economists in a Bloomberg survey, after data showed consumer prices jumped in April. 

The yuan headed for its biggest two-day drop versus peers since February, spurring speculation the authorities are weakening the currency to counter a slowing economy. The Chinese currency has fallen 0.8 percent against a trade-weighted basket this week to the lowest level since October 2014. The People’s Bank of China weakened its reference rate against the dollar by the most in a week on Tuesday.

Source: Bloomberg Business News