EMERGING MARKETS-Beijing stimulus hopes lift emerging stocks, lira retreats

  • Reuters
  • Stock Market News
EMERGING MARKETS-Beijing stimulus hopes lift emerging stocks, lira retreats
Credit: © Reuters.

By Claire Milhench

LONDON, July 24 (Reuters) - Promises of more stimulus from Beijing lifted Chinese shares to one-month highs and boosted broader emerging equities on Tuesday while Turkey's lira retreated ahead of a central bank meeting.

Investors were cheered by China's pledge to pursue a more "vigorous" fiscal policy, stepping up its efforts to support growth in view of the increasingly heated Sino-U.S. trade war that could deal a harsh blow to the economy. President Donald Trump's threat to impose tariffs on all $500 billion of imported goods from China rattled emerging markets on Monday, but China's practical response improved sentiment.

Chinese mainland shares .CSI300 .SSEC jumped 1.6 percent and Hong Kong shares .HSI rose 1.4 percent, helping MSCI's benchmark emerging equities index .MSCIEF gain 0.6 percent.

Tech-heavy South Korea .KS11 and Taiwan .TWII also rose 0.4 percent while Poland .WIG20 led emerging Europe bourses, up 1 percent to trade at the highest level since mid-June.

But the expectations of further loosening in China drove the offshore yuan CNH= down 0.4 percent to a 13-month low. The onshore yuan CNY= also fell 0.3 percent to its lowest since June 2017 and the yield on 10-year Chinese government bonds CN10YT=RR climbed over 5 basis points to 3.58 percent.

The central bank's 502 billion yuan liquidity injection into the banking system has also contributed to renminbi weakness.

Other emerging market currencies struggled to make headway with Turkey's lira TRY= falling 0.5 percent ahead of the first central bank rate-setting meeting since the election. Turkish stocks .XU100 also fell 0.5 percent.

Inan Demir, senior emerging economist at Nomura International, said the central bank needed to address the significant deterioration in inflation - which hit a 14-year high in June - with a 300 basis point (bp) hike or more, but a moderate hike of 100-125 bps was more likely. damage to the economy as a result of not hiking today would be far bigger than any damage that a moderate hike can inflict," he warned.

The lira firmed over 1 percent on Monday after finance minister Berat Albayrak was quoted as saying that Turkey would not fight with markets but pursue a "win-win" relationship with them. said Tuesday's weakness was partly due to the continued depreciation in the Chinese renminbi, which was weighing on emerging currencies in general.

The Hungarian forint EURHUF= tested three-week lows against the euro ahead of a central bank meeting at which the bank is expected to keep rates on hold. has picked up in central Europe's fast-growing economies, but the Hungarian central bank remains one of the most dovish in the region, with rates at 0.9 percent.

"Given the loose National Bank of Hungary policy stance, we see HUF as the most vulnerable CEE currency and look for EUR/HUF to re-test the 330 level in summer," ING analysts warned in a note.

Mexico's peso MXN= firmed 0.3 percent against the dollar after Trump spoke warmly Mexico's incoming president on Monday, saying he expected to get "something worked out" on NAFTA.

Equities

Latest

Net Chg % Chg % Chg

on year

Morgan Stanley (NYSE: MS )

Emrg Mkt Indx .MSCIEF 1076.21

+6.69 +0.63 -7.10

Czech Rep

.PX

1090.70

+2.97 +0.27 +1.16

Poland

.WIG20

2228.62 +24.09 +1.09 -9.45

Hungary

.BUX

34997.51 -143.52 -0.41 -11.12

Romania

.BETI

7960.90 +11.51 +0.14 +2.67

Greece

.ATG

752.06

+0.56 +0.07 -6.27

Russia

.IRTS

1136.40

+6.48 +0.57 -1.56

South Africa

.JTOPI 50753.79 +272.47 +0.54 -3.39

Turkey

.XU100 94874.34 -430.81 -0.45 -17.74

China

.SSEC

2905.94 +46.40 +1.62 -12.13

India

.BSESN 36793.50 +74.90 +0.20 +8.04

Currencies

Latest

Prev

Local

Local

close currency currency

% change % change

in 2018

Czech Rep

EURCZK=

25.78

25.82 +0.15

-1.00

Poland

EURPLN=

4.32

4.33 +0.07

-3.40

Hungary

EURHUF= 326.42

326.21 -0.06

-4.87

Romania

EURRON=

4.64

4.64 +0.15

+0.86

Serbia

EURRSD= 117.92

117.90 -0.02

+0.41

Russia

RUB=

62.90

63.05 +0.22

-8.34

Kazakhstan

KZT=

344.86

345.46 +0.17

-3.50

Ukraine

UAH=

26.59

26.46 -0.47

+5.87

South Africa ZAR=

13.48

13.45 -0.21

-8.32

Kenya

KES=

100.45

100.50 +0.05

+2.64

Israel

ILS=

3.65

3.64 -0.04

-4.62

Turkey

TRY=

4.76

4.74 -0.49 -20.43

China

CNY=

6.81

6.79 -0.31

-4.51

India

INR=

68.97

68.84 -0.19

-7.45

Brazil

BRL=

3.78

3.78 +0.01 -12.42

Mexico

MXN=

18.85

18.88 +0.17

+4.24

Debt

Index Strip Spd Chg %Rtn Index

Sov'gn Debt 11EML EMBIG 358

2

.02 7 78.26 1

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