GRAPHIC-Brazil leads first quarter's rebound in emerging markets

  • Reuters
  • Forex News
GRAPHIC-Brazil leads first quarter's rebound in emerging markets
Credit: © Reuters.

(Repeats story that first ran Wednesday to additional clients;
no change in text.)
By Marc Jones and Vincent Flasseur
LONDON, March 30 (Reuters) - Emerging markets are set to end
the first quarter of 2016 with strong gains, something few
investors would have bet on in January, after the sector's worst
start to a year on record.
As this graphic shows (http://reut.rs/1ZKAaO6), emerging
market stocks, currencies and bonds fell in the first few weeks
of 2016 as oil prices slumped, China's economic growth faltered
and interest rates in the U.S., and therefore the world, rose
from record lows.
The rout left MSCI's benchmark EM equity index .MSCIEF
down 14 percent by the time it bottomed on Jan. 21. Bond market
.JPMEGR selling drove government bond spreads - a rough
reflection of borrowing costs - up over 18 percent.
The recovery began with oil, as winter hit the United
States, China threw stimulus at its economy and the Federal
Reserve rolled expectations for interest rate increases.

"It had all been about the three C's. Commodities, China and
central banks," said Aberdeen Asset Management investment
committee member Kevin Daly.
When oil slumped to $27 a barrel, people were predicting
some "pretty dark outcomes" for the global economy, Daly said.
"But since then oil has bounced, the slowdown in the dollar has
lead to a firmer Chinese currency and the market has priced out
a lot of the Fed hikes, which is a real boost to risk appetite."

Two months on from the lows, MSCI's dollar-based emerging
equity index is up 20 percent. Currencies - from the Russian
rouble RUB= to the South African rand ZAR= - have
strengthened against the dollar and struggling parts of Africa
have some of the best-performing bonds in the world.
Probably the most impressive turnarounds came in Brazil,
which is grinding through a political crisis.
Sao Paulo stocks .BVSP , which lost a third of their value
in the second half of 2015, have regained more than half of that
since mid-January, making it the world's top performing major
market.
In dollar terms, Brazilian equities are up more than 25
percent. That's especially remarkable for a country looking to
impeach its president.
The Brazilian currency, the real BRL= , is up 10 percent
and bonds have surged.
Add in big gains for stocks in Peru (25 percent) and
Colombia (17 percent) and a big rally in Argentina debt, and
Latin America has been the best region globally.
Another turnaround has come in local-currency emerging
market debt. Many big global banks and funds were issuing
warnings at the start of the year after a torrid 2015. But
returns in dollar terms are currently above 8 percent, double
that of U.S. Treasuries. (http://reut.rs/1Rx8jLT)
As this shows (http://link.reuters.com/weh36s), Hungary -
the first developing country to cut interest rates to negative
levels - remains Europe's best equity performer with a 12
percent jump, having topped the list last year, too .BUX .
It remains just ahead of oil-rich Russia .IRTS , which is
up almost 11 percent for the year and 35 percent since the
trough in crude prices, and Poland .WIG20 , which has recovered
from an unexpected shock credit rating downgrade in January.
Turkey .XU100 , a big oil importer but also at the front
line of the Syria refugee crisis, has seen stocks jump 17
percent.
Parts of Asia have done well, too. Thailand .SETI ,
Malaysian .KLSE and Indonesian .JKSE have seen shares rise
13 percent, 9.5 and 8 percent respectively as they have
continued a recovery from big losses last year.
But China's markets, despite Beijing's support
are still struggling. The main equity indices have recovered in
recent weeks, but they are still down roughly 8 percent year to
date as worries linger about the yuan.
"The PBOC (China's central bank) is now more important for
emerging markets than the Fed," said SEB bank emerging market
strategist Per Hammarlund. "I don't think I'm being
controversial any more when I say that."

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EM asset YTD http://reut.rs/1ZKAaO6
Cross assets global YTD http://reut.rs/1Rx8jLT
Local EM debt YTD http://reut.rs/1Rx8jLT
EM equites YTD http://link.reuters.com/weh36s
EM FX performance vs dollar YTD http://link.reuters.com/weh36s
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

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