October 22, 2018 / 9:23 AM / 9 months ago

EMERGING MARKETS-Chinese stimulus hopes drive emerging stocks, weaker dollar buoys FX

Oct 22 (Reuters) - Emerging market equities rose on Monday led by blue-chip Chinese stocks which rallied to their biggest one-day gain in almost three years, while a weaker dollar bolstered most developing market currencies, with South Africa’s rand firming 1 percent.

Chinese stocks rose more than 4 percent, extending Friday’s gains, on the promise of more stimulus as China revealed tax change measures to support the economy and companies.

That helped MSCI’s emerging market stock index gain more than 1 percent, with most stock markets from Taiwan to South Africa moving higher.

In a week that will see numerous central bank meetings, most emerging market currencies also firmed against a largely weaker dollar as the euro strengthened due to easing concern over Italy.

“We might have a bit more positive sentiment this week given that we have had some of the big issues out of our way,” said Jakob Christensen, head of emerging markets research at Danske Bank.

Emerging markets have been under pressure this year with Chinese stocks down 19 percent, hit by the U.S.-China trade stand-off, tensions with Saudi Arabia and the West and uncertainly about the global growth outlook.

Among currencies, Turkey’s lira weakened slightly, and the Russian rouble firmed ahead of respective central bank meetings later this week at which analysts expect interest rates to be left unchanged.

South Africa’s rand climbed with attention focused on its medium-term budget policy statement, which is due on Wednesday. New Finance Minister Tito Mboweni will stick closely to previous budget forecasts for the coming two fiscal years, with only slight slippages due to poor revenues, economists predicted in a Reuters poll.

“The focus will be on the balance between growth supporting measures and debt sustainability. Therefore, we believe all the attention would be on the structure of expenditures and Treasury’s economic growth forecasts,” Credit Suisse analysts said about the budget in a briefing note.

Most Eastern European peers including the Polish zloty and Czech crown steadied on news that Moody’s had kept Italian government’s credit rating outlook at stable.

Italian Deputy Prime Minister Luigi Di Maio also reiterated that the government has no intention of leaving the Euro.

For GRAPHIC on emerging market FX performance 2018, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2018, see tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru Editing by Helen Popper)

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