Emerging market stocks jumped 2% on Wednesday, led by a surge in Hong Kong stocks, while currencies were muted as the dollar tried to recoup some losses.
Hong Kong shares jumped 5.9% as HSBC shares climbed 5.7% after the bank announced it was considering selling its multi-billion dollar Canada business . Internet and technology heavyweights such as Tencent, Alibaba and Meituan jumped between 5.6% and 8.2%.
Elsewhere, Turkish stocks rose 0.5%, extending gains to a fourth session. The benchmark has rebounded more than 10% since Friday. Most other stock exchanges in emerging Europe, the Middle East and Africa lost ground. Optimism of a strong overnight close on Wall Street appeared to have faded as Western European stock markets and US stock futures fell.
The MSCI index of emerging market stocks was also up 2% on Tuesday, after weak U.S. manufacturing data boosted bets that the Federal Reserve could be forced to ease its aggressive tightening stance. Eyes will now be on Friday’s US labor market report. But keeping investors nervous, San Fransisco Fed President Mary Daly called for more hikes and sustained restrictive policies until inflation returns to the Fed’s 2% target.
“We remain skeptical that the Fed is poised to pivot on the back of slightly weaker US data this week,” ING strategists said. As major central banks are aggressively tightening policies to curb inflation, fears of recession have emerged, undermining risk appetite. The emerging market equity index is down more than 25% so far this year, while its currency counterpart is down 7.7%.
The Hungarian forint fell 0.6%, nearing an all-time low as the Russian-Ukrainian war hampers gas flows, raising concerns about energy supplies and soaring costs. Hungary’s central bank will offer 1 trillion forints ($2.38 billion) of new short-term bills in a tender on Thursday, in a bid to drain forint liquidity from the market in line with a announcement made last month.
The Romanian leu and Polish zloty made small moves against the euro ahead of central bank decisions later in the day. Romania’s interest rate rose 50 basis points to 6%, while Poland is expected to rise 25 basis points to 7.00% amid rising inflation.
In Poland, the market is still tilted towards the hawkish side as inflation has not yet peaked, ING said. But as the central bank attempts to end the bullish cycle, Wednesday’s meeting will be negative for the zloty, they said. The South African rand lost 0.6% against the dollar after gaining nearly 3% in the past two sessions.
The country’s central bank said on Tuesday it estimates planned power cuts implemented by the struggling utility Eskom will shave about 1.0 percentage point off economic growth in 2022. For the GRAPH on the performance Emerging Markets FX in 2022, see http://tmsnrt.rs/2egbfVh For the GRAPH on the performance of the MSCI Emerging Index in 2022, see https://tmsnrt.rs/2egbfVh For TOP NEWS in Emerging Markets
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