EM stocks scale 19-month highs; rand firms on rate cut


Emerging market stocks climbed toward 19-month highs on Friday, as data showed the Chinese economy was chugging along despite a bruising trade war with the United States, while South Africa’s rand firmed after a surprise rate cut.

A basket of emerging market equities rose 0.3%, led by gains in Chinese , Russian and South African stocks.

The index was on track to end higher for the seventh week in a row, as sentiment improved with the signing of an initial US-China trade deal and investors bet on faster global growth amid loose monetary policy by the world’s biggest central banks.

“Such an environment should offer emerging markets the chance to find more stable footing and provide room for riskier assets to advance higher,” said Han Tan, market analyst at FXTM.

“Although downside risks such as geopolitical conflicts could rear their head at any time, investors should be able to move forward with cautious optimism knowing that major risks have considerably subsided for the time being.”

Data on Friday showed China’s economy ended 2019 on a somewhat firmer note as the trade truce with the United States revived business confidence and growth-boosting measures finally appeared to be taking hold.

The Chinese yuan firmed to its strongest level in six months, also lifted by comments that the world’s second biggest economy will roll out more support measures this year to keep the momentum in the economy rolling.

In the developing world, South Africa’s rand added 0.4% and was on course for its best day in more than a week, as the central bank unexpectedly cut rates on Thursday to boost faltering economic growth.

The currency in Africa’s most industrialised economy has lagged regional peers this month, partly as the country grapples with the most severe blackouts in a decade.

Russia’s rouble was up about 0.3% against a steady dollar, with all eyes on a government reshuffle after Mikhail Mushustin was confirmed as the new prime minister on Thursday.

Trading in the country turned volatile on Wednesday when the government’s resignation unnerved investors, but assets quickly recovered to trade higher. The rouble-based MOEX stock index hit a record high on Friday.

The Turkish lira was flat, a day after the central bank trimmed interest rates for the fifth consecutive time and indicated that it would reduce them again this year, albeit at a more moderate pace.

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