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EM-Stocks set for worst quarter since pandemic-hit March 2020

With the greenback holding steady near one-year highs against major peers, most emerging currencies attempted gains.
Image: Bartek Sadowski/Bloomberg

Emerging market stocks stemmed losses on Thursday, helped by a rally in Mainland China and emerging Europe, but remained on course for their first quarterly loss since the coronavirus pandemic flared in March 2020.

Beijing’s efforts to quell fears of a power shortage, and a string of downbeat economic data from China, weaker-than-expected September factory activity being the latest, spurred bets of monetary policy easing, lifting heavy-weight mainland China stocks .

But Hong Kong stocks fell as technology giants lagged and real estate firms followed Evergrande lower after it missed a deadline for a coupon repayment.

MSCI’s index of EM shares was flat. While worries about an economic slowdown in China spooked some other Asian shares, those elsewhere took heart from a higher open for Western European bourses.

Russian stocks were on their way back to record highs, up 0.8%, while those in Turkey, Hungary and Poland rallied between 0.3% and 0.4%

“A sense of calm has certainly returned to financial markets following the heavy sell-off across equities witnessed earlier in the week,” said Lukman Otunuga, a senior research analyst at FXTM.

But the broader EM index was set for a quarterly drop of about 9%, breaking a five-quarter winning streak. Beijing’s crackdown on businesses, worries about a likely default at Evergrande, slowing growth and rising inflation weighed on risk appetite this quarter.

This would be the index’s worst third quarter since the September quarter of 2015.

With the greenback holding steady near one-year highs against major peers, most emerging currencies attempted gains.

Turkey’s beleaguered lira was 0.5% firmer, pulling away from a record closing low of 8.9490 marked on Wednesday as worries persist over President Tayyip Erdogan’s influence on monetary policy.

South Africa’s rand climbed 0.5% in its best day in about three weeks, while Russia’s rouble firmed 0.4%.

Ahead of a central bank meeting on Thursday, Mexico’s peso snapped a four-day losing streak to rise 0.2%. The benchmark interest rate is expected to be hiked by 25 basis points to 4.75%.

Tunisian bonds continued their climb and the currency jumped 1%, attempting to recoup losses suffered in the previous session.

President Kais Saied named Najla Bouden Romdhane, a little-known professor of geophysics, as Tunisia’s first woman prime minister on Wednesday. After being elected in 2019, Saied had been under pressure to form a government.

Poland’s zloty rose 0.2% against the euro. Poland’s Constitutional Tribunal will make its third attempt on Thursday to rule on whether the country’s constitution or European law takes precedence in solving disputes.

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