LONDON, June 28 Emerging stock markets looked
set to gain more than 1 percent for the third day running on
Friday, helped by more lenient credit conditions in China after
a sell-off on the prospect of reduced U.S. monetary stimulus.
A month ago, the MSCI emerging shares index was
just about flat for the year, having recovered from a rocky
start to 2013.
But the signals from the U.S. Federal Reserve that it is on
course to cut back its bond-buying programme this year drove a
17 percent dive in the index from mid-May. Even with an almost 2
percent gain on Friday, it is down 13.3 percent on the year.
The relief this week has come from China's promise to take a
more lenient attitude to struggling banks after authorities
allowed short-term interbank rates to surge to more than 28
percent in an effort to curb high-risk lending.
That has eased concerns that China could face some form of
financial crisis but leaves analysts still worried about the
pace of growth.
"The real test will come when it becomes obvious to
investors there are severe structural problems in China," said
John-Paul Smith, head of emerging equity strategy at Deutsche
Weaker-than-expected gross domestic product data from the
United States this week has also dented the argument for a swift
reining in of its own programme of monetary easing.
Turkish, Russian, Indian and
Chinese shares all gained more than 1.2 percent. Russia
had its rating affirmed by rating agency Standard & Poor's at
The South African market was helped by Aspen Pharmacare
, which unveiled the latest in a string of acquisitions
on Thursday, buying medicines from U.S. firm Merck.
Emerging market sovereign 10-year spreads compared to U.S.
10-year treasury bonds have widened as much as 100 basis points
in the past month, since Federal Reserve chairman Ben Bernanke
signalled an exit from quantitative easing on May 22.
Spreads have narrowed more than 30 bps this week, however,
edging in 3 bps on Friday to 357 bps. Emerging market
fixed income funds recorded their highest weekly outflow in the
week ending June 26, banks quoting EPFR said.