Market Watch | Emerging Assets Set for Highest Close in a Year on Oil, Stimulus

LAGOS, Nigeria, Capital Markets in Africa: Emerging-market stocks and currencies headed for their highest close in a year as a recovery in oil prices and optimism central banks will keep monetary policy accommodative boosted demand for higher-yielding assets.

A gauge of developing-market shares was poised for a fourth weekly gain, the longest winning streak since October, after a Bank of England interest-rate cut eased concern the U.K.’s decision to exit the European Union will slow global growth. Malaysia’s ringgit led gains in currencies as Brent crude headed for its biggest weekly advance in a month. The Taiwan dollar and Russia’s ruble also strengthened.

“Investors, especially those outside of emerging markets, are on the search for higher yields,” said Nescyn Presinede, a trader at Rizal Commercial Banking Corp. in Manila. “Easing by central banks will provide liquidity and support as shown by the flow of funds into emerging markets in the past weeks. The rebound in oil prices is possible signal of a pickup in global economic activity and that bodes well for crude-exporting countries.”

The Bank of England’s decision to cut its benchmark to a record low on Thursday follows the addition of stimulus from policy makers in Australia and Japan in the past week. The move also comes before a monthly payrolls report in the U.S., where traders have been paring bets that the Federal Reserve will increase benchmark interest rates this year.

Stocks
The MSCI Emerging Markets Index of shares climbed 1.1 percent as of 8:58 a.m. in London, poised for its highest close since Aug. 10, 2015. The gauge has risen 1.4 percent since July 29. The four-week winning streak is the longest since October. All 10 industry groups advanced.

Benchmark equity indexes climbed 0.9 percent in India and South Korea and 0.8 percent in Indonesia.

Indonesian shares were boosted after a government report showed economic growth quickened to 5.2 percent in the second quarter from a revised 4.9 percent three months earlier. That exceeded the 5 percent median estimate in a Bloomberg survey of economists.

China’s stocks in Hong Kong rose for the third time in four days as investors bet the nation’s central bank will add to stimulus. The Hang Seng China Enterprises Index jumped 1.5 percent.

Currencies
The ringgit strengthened 0.7 percent as the advance in oil boosted the outlook for Malaysia which derives 20 percent of its revenue from energy-related sources. Taiwan’s dollar rose 0.5 percent and the ruble strengthened 0.4 percent.

“A recovery in oil prices and a better tone to global equity markets, helped by the aggressive BOE easing, helped strengthen both the ringgit and Korean won on the open,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore. “The ringgit remains sensitive to oil price movements, while the won is being driven by foreign equity flows, where investor sentiment is an important driver.”

The MSCI Emerging Markets Currency Index rose 0.4 percent, extending this week’s advance to 0.7 percent. The gauge is heading for its highest close since July 2015.

Source: Bloomberg Business News