EMERGING MARKETS – Stocks rise, exchange rate rises as oil pressure decreases
* Flat Polish zloty after the best day of the year
* Hong Kong real estate stocks recover on a new development plan
* Russian ruble flattens as inflation rises
Oct. 7 (Reuters) – Most emerging market stocks and currencies rose on Thursday as oil prices retreated from recent highs, although the prospect of a weakening in US monetary policy and a slowdown economy kept sentiment muted.
The MSCI Emerging Markets (ME) Equity Index jumped 1.8% after hitting a six-week low earlier, while currencies rose 0.2% after falling prices of the oil following an unexpected rise in US inventories.
Hong Kong stocks jumped 3% as news of plans for a new northern metropolis bolstered real estate stocks and helped them overcome recent nervousness over a debt crisis in the sector.
Most emerging market currencies benefited from the weaker dollar as risk appetite improved slightly after increased volatility throughout the week.
Progress towards lifting the US debt ceiling has also helped improve sentiment
But most currencies, especially those from Europe, the Middle East and Africa, made small moves as investors remained concerned about the potential tightening of Federal Reserve policy, ahead of key data on wages in the United States on Friday.
Fears of economic growth held back by persistent inflation, particularly in emerging markets, have also weighed on markets in recent sessions.
The Russian ruble rose 0.1%, trailing most of its emerging market peers after data on Wednesday showed inflation jumped to nearly 7.5% in early October, its highest since June 2016.
“The data does not require the central bank to step up the rate hike … We expect the central bank to raise the policy rate by 25bp to 7.00%,” analysts wrote from Credit Suisse in a note.
The Polish zloty traded flat against the euro on Thursday after the central bank unexpectedly raised interest rates on Wednesday and pushed the currency to a three-week high.
The zloty jumped more than 1% on Wednesday, its best day in more than a year, after rising 40 basis points to 0.5%, the first after nine years.
“Poland was in a delicate situation because of its central bank’s choice to ignore the inflation overrun, calling it transitory … Given such a fundamental gap, the NBP should signal its firm intention to continue to tighten so that the zloty stops underperforming, ”Tatha said. Ghose, FX and EM analyst at Commerzbank wrote in a note.
The move sees Poland joining its peers in Central Europe in tightening its policy as it grapples with high inflation in the wake of the COVID-19 pandemic.
The Hungarian forint rose 0.2%, while the Czech crown lost 0.1%.
For the CHART on the performance of emerging markets forex in 2021, see tmsnrt.rs/2egbfVh For the CHART on the performance of the MSCI emerging market index in 2021, see tmsnrt.rs/2OusNdX
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