Wednesday, January 26

EM-Stocks, forex company after China data; SA budget

Emerging market stocks rose on Monday after China posted a record trade surplus in October, while currencies firmed up against a stable dollar ahead of US inflation data and central bank comments to end of this week.

Asian stocks rose 0.2%, following Friday’s strong finish on Wall Street, although gains were limited by signs of weakening domestic demand in China and a technology-driven slide in Hong Kong stocks.

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China’s export growth also slowed, but beat estimates, helped by booming global demand ahead of the winter holiday seasons, a lessening of the energy crisis and an improvement in supply chains.

The MSCI emerging market equity index rose 0.3%, and shares in Russia, South Africa and Turkey rose 0.5% to 1%.

With six officials from the US Federal Reserve scheduled to speak on Monday, as well as US inflation data from Wednesday, the dollar was stable.

An emerging market currency index rose for the third consecutive session. The Turkish lira moved further away from record lows, while the South African rand rose for the fourth consecutive session.

Repeated power outages imposed by the state power company Eskom have been a major constraint on South Africa’s economic growth. He is expected to get a breather from a multi-million dollar partnership between some developed nations to help the country get off coal quickly.

But more immediately, the Nov. 11 mid-term budget could see an announcement of a basic income or family allowance, which could raise new fiscal concerns and possibly lead to rand weakness.

“The main risk is related to a potential increase in spending … that would offset recent efforts to stabilize debt and make the budget more vulnerable to abrupt changes in global demand for raw materials,” said Credit Suisse analyst Alexey. Pogorelov.

Russia’s ruble fell 0.2% despite higher oil prices, still digesting last week’s drops in crude oil after a few holidays in the Russian market.

Russia, Ukraine and Greece were at or near record levels of reported Covid-19 cases since the pandemic began two years ago, according to a Reuters analysis.

“The idea that Covid-19 could end soon is becoming questionable … the evolution of inflation and monetary policy changes in reaction to these constitute the great unknown for the development of exchange rates,” said Ulrich Leuchtmann , head of currency and commodity research at Commerzbank.

In China’s beleaguered real estate sector, some Evergrande offshore bondholders had not received interest payments due November 6 until Monday morning in Asia, but the 30-day grace period now begins.

On the ratings, Moody’s changed Saudi Arabia’s outlook to “stable” from “negative” on Friday, saying the government was likely to reverse most of its debt increase in 2020 while preserving fiscal reserves.

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