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EM-Lira set for sixth weekly drop; earnings boost HK shares

Emerging market stocks rose 1.8%, while currencies gained 0.4%, but were still on track for their fifth straight monthly decline.
Image: Nicole Tung/Bloomberg

The Turkish lira was set for its sixth straight weekly loss on Friday, while Hong Kong stocks rose as investors found comfort in signs of improving Sino-US relations and expectations that Beijing will implement further measures to revive growth.

Technology stocks led the Hong Kong’s Hang Seng index higher after better-than-expected earnings from heavyweights Alibaba Group  and Baidu.

China’s blue-chip CSI300 index rose 0.2% after the US Secretary of State said Washington will not block Beijing from growing its economy, but wants it to adhere to international rules.

Emerging market stocks rose 1.8%, while currencies gained 0.4%, but were still on track for their fifth straight monthly decline.

“Risk appetite has improved. We come from several weeks of absolutely dismal sentiment and it’s a good sign that things seem to be reversing a bit,” said Cristian Maggio, head of emerging markets strategy at TD Securities.

Turkey’s lira slipped and was poised for its sixth straight weekly loss after the central bank decided to hold key rates at 14% amid stubborn inflation.

“The lira has been in a tailspin for some time now. They had a rate announcement yesterday and they did nothing despite inflation being at 70%,” added Maggio.

“The country is, from a macro financial point of view, very imbalanced at the moment and the lira reflects that.”

In central Europe, the Hungarian forint edged up 0.1%, but was set to end the week lower.

Hungary’s Budapest SE Index extended losses and on course for its worst weekly performance in nearly three months as investors awaited details of new windfall taxes on banks and large private companies.

South Africa’s rand firmed 0.2% as the US dollar sank to a one-month low amid signs the Federal Reserve might slow or even pause its monetary policy tightening in the second half of the year.

The Russian rouble extended losses against the dollar following a near 10% slump in the previous session, as the central bank cut interest rates and hinted more cuts would follow, while the prospect of easing capital controls and a possible sovereign default hammered the currency.

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