EMERGING MARKETS-Bounce in lira brings FX respite, emerging stocks hit 13-mth low

  • Reuters
  • Stock Market News
EMERGING MARKETS-Bounce in lira brings FX respite, emerging stocks hit 13-mth low
Credit: © Reuters.

By Claire Milhench

LONDON, Aug 14 (Reuters) - A bounce in Turkey's lira from a record low hit in the previous session provided respite on Tuesday for other currencies that have been caught in the crossfire, but emerging equities hit a 13-month low after weak China data.

Investors had scrambled to cut emerging market exposure across the board after the lira went into freefall over concerns about the direction of monetary policy under President Tayyip Erdogan and Turkey's worsening relations with the United States.

But with Turkey's lira TRY= rebounding 4.5 percent, emerging currencies stabilised, with South Africa's rand ZAR=D3 2.3 percent firmer after hitting a two-year low on Monday. beaten down currencies also rallied, with Russia's rouble RUB= firming 1.4 percent and Mexico's peso MXN= 1.1 percent.

But MSCI's benchmark emerging equities index .MSCIEF touched its lowest level since July 2017 in Asian trading after disappointing Chinese data, before recovering to trade flat in the European session.

Turkey's lira was recovering from a record low of 7.24 per dollar hit on Monday, but Piotr Matys, a strategist at Rabobank, said the relief was likely to be short-term. The lira was still down around 40 percent year-to-date, he said. currency found a floor after the central bank pledged to provide liquidity, but Matys said the damage was done.

"Inflation is set to accelerate even further from already high levels and Turkey may not avoid a hard landing after the economy grew above potential over the last few quarters, so the outlook is quite bleak," he said.

Investors are awaiting Thursday's conference call with finance minister Berat Albayrak at which he will have to convince the market Turkey will not try to maintain rapid growth at all costs. the issue is that he lacks credibility," said Matys, adding that investors wanted to see concrete steps in terms of fiscal measures and structural reforms.

Turkish sovereign bonds rose across the curve, with some issues gaining around 2.6 cents, while five-year credit default swaps fell 40 basis points from Monday's close to 540 bps. Turkish stocks .XU100 also bounced 1.6 percent.

But more broadly emerging stocks struggled after signs China's economy was cooling further, with fixed-asset investment growth at its slowest pace since at least 1996. Retail sales also missed expectations. mainland shares .CSI300 fell 0.5 percent and Hong Kong stocks .HSI dipped 0.6 percent, while the yuan CNY= touched its weakest level since May 2017.

Matys said that even if a full-scale financial crisis was avoided in Turkey, emerging markets were facing the same headwinds as before: "These include the ongoing trade war between the U.S. and China and signs of an FX war."

Indonesia shares .JKSE tumbled 1.5 percent but emerging Europe opened stronger after data showed the region's economies continued to grow robustly.

Budapest shares .BUX rose 0.9 percent after Hungary's annual growth picked up to an above-forecast 4.6 percent while Warsaw stocks .WIG20 gained 0.6 percent with GDP growth at 5.1 percent. rupee firmed INR= 0.1 percent after hitting record lows in the previous session, but the Argentine peso ARS= fell 2.4 percent to close at a record low overnight. central bank raised rates by 5 percentage points on Monday to 45 percent, but the currency has been pressured by a corruption scandal and the negative sentiment driven by the turmoil in Turkey. GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see http://tmsnrt.rs/2dZbdP5

For TOP NEWS across emerging markets CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB ) Emerging Markets Prices from Reuters

Equities

Latest

Net Chg % Chg % Chg

on year

Morgan Stanley (NYSE: MS )

Emrg Mkt Indx .MSCIEF 1042.91

-0.39 -0.04 -9.97

Czech Rep

.PX

1069.95

-2.68 -0.25 -0.76

Poland

.WIG20

2274.08 +13.20 +0.58 -7.60

Hungary

.BUX

36031.91 +338.08 +0.95 -8.50

Romania

.BETI

8120.89 +25.51 +0.32 +4.74

Greece

.ATG

726.86

+6.15 +0.85 -9.41

Russia

.IRTS

1077.62 +17.86 +1.69 -6.65

South Africa

.JTOPI 51452.37 -369.02 -0.71 -2.06

Turkey

.XU100 93753.76 +1069.21 +1.15 -18.71

China

.SSEC

2781.16

-4.71 -0.17 -15.91

India

.BSESN 37895.16 +250.26 +0.66 +11.27

Currencies

Latest

Prev

Local

Local

close currency currency

% change % change

in 2018

Czech Rep

EURCZK=

25.69

25.76 +0.27

-0.64

Poland

EURPLN=

4.30

4.30 +0.05

-2.87

Hungary

EURHUF= 323.13

323.09 -0.01

-3.90

Romania

EURRON=

4.65

4.66 +0.05

+0.49

Serbia

EURRSD= 117.85

117.89 +0.03

+0.47

Russia

RUB=

66.85

67.77 +1.37 -13.75

Kazakhstan

KZT=

362.72

363.87 +0.32

-8.25

Ukraine

UAH=

27.45

27.35 -0.36

+2.53

South Africa ZAR=

14.14

14.41 +1.88 -12.61

Kenya

KES=

100.65

100.60 -0.05

+2.43

Israel

ILS=

3.70

3.69 -0.16

-5.92

Turkey

TRY=

6.60

6.86 +3.86 -42.63

China

CNY=

6.89

6.89 +0.04

-5.50

India

INR=

69.91

70.02 +0.16

-8.69

Brazil

BRL=

3.88

3.88 +0.00 -14.72

Mexico

MXN=

18.96

19.11 +0.79

+3.62

Debt

Index Strip Spd Chg %Rtn Index

Sov'gn Debt 11EML EMBIG 402

-1

.05 7 61.08 1

For GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see http://tmsnrt.rs/2dZbdP5

For TOP NEWS across emerging markets CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB )

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