Emerging-market stocks were on the cusp of a bull market and currencies extended gains as the Federal Reserve’s less aggressive rate path prompted a reassessment of developing-nation prospects.
The MSCI Emerging Markets Index rose for a third day to take its advance since late January to just shy of 20 percent after the U.S. central bank signaled two, instead of four, rate increases this year. Energy shares were headed for their best month in almost a year as Brent crude held above $40 a barrel for a third day. The People’s Bank of China raised the yuan’s fixing by the most since November, while South Korea’s won was the biggest currency gainer.
A dovish Fed that appears more concerned about the outlook for the global economy is a shot in the arm for developing-nation assets that had dropped to multi-year lows on falling commodity prices and a pessimistic international growth outlook. Macquarie Bank Ltd., one of the world’s top 10 currency forecasters, turned from dollar bull to short-term bear following the Fed meeting that ended Wednesday.
“It’s a huge relief rally for emerging markets,” said Andy Ji, a foreign-exchange strategist at Commonwealth Bank of Australia in Singapore. “The rally still has legs, at least for the next three months, because valuations are attractive.”
The Nikkei share average fell for a fourth day on Friday after the dollar plunged to a near 17-month low against the yen overnight, pressuring exporters and dented overall sentiment.
The Nikkei fell 1.3 percent to 16,724.81, the lowest closing level since March 9. The Nikkei dropped 1.3 percent for the week.
China stocks closed up on Friday as the weaker dollar helped ease concerns on capital outflows from the country.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 1.5 percent, to 3,171.96, while the Shanghai Composite Index gained 1.7 percent, to 2,955.15 points.
Hong Kong shares rose on Friday, buoyed by gains in mainland China shares which were boosted by easing fears of capital outflows as the dollar weakened.
The Hang Seng index rose 0.8 percent to 20,671.63 points, while the China Enterprises Index gained1.2 percent to 8,883.01.
Total trading volume of companies included in the HSI index was 2.2 billion shares.
For the week, the Hang Seng was up 2.3 percent.
Reference: Reuters, Bloomberg
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