January 18, 2018 / 10:08 AM / 5 months ago

EMERGING MARKETS-Emerging stocks at near-decade high after China data beats forecast

LONDON, Jan 18 (Reuters) - Emerging stocks pushed to their highest in almost a decade on Thursday as Chinese economic data beat forecasts, with some Asian bourses at record peaks, while the lira and rand firmed ahead of central bank meetings.

China’s economy grew by 6.8 percent in the fourth quarter and industrial output expanded by 6.2 percent, both ahead of expectations , adding fuel to the bullish sentiment in regional markets.

China’s mainland shares rose almost 1 percent to two-year highs, while Hong Kong, Indonesia, India and Thailand all scaled fresh peaks.

MSCI’s benchmark emerging equities index continued its steady ascent, up 0.3 percent, after a rally on Wall Street ended with a round of record closing highs.

Emerging Europe also opened stronger with Moscow shares up 0.3 percent to an all-time high, underpinned by oil prices near $69 a barrel. Warsaw shares touched their highest since November 2013.

William Jackson, senior emerging market economist at Capital Economics, said a number of positive factors were underpinning emerging markets.

“It’s a confluence of tailwinds – strong growth domestically and a favourable external environment, in most countries relatively strong balance sheets, and a rise in commodity prices, particularly oil, have provided support to commodity producers, while the weakness in the dollar recently has helped emerging currencies.”

The Turkish lira firmed 0.5 percent against the dollar and the South African rand 0.6 percent.

Both countries’ central banks meet today but rates are expected to stay on hold, Turkey at 12.75 percent and South Africa at 6.75 percent.

Jackson said South Africa’s central bank had made a very hawkish statement at its previous meeting but now the rand has strengthened, the question was whether the bank would cut rates.

“Our sense is they won’t, but given the economy seems to be a bit stronger we could see a more dovish stance than we got used to in the second half of last year.”

South Africa’s rand surged to 2-1/2 year highs earlier this week on hopes Deputy President Cyril Ramaphosa will be able to turn the country around and President Jacob Zuma will be pushed out early.

Ramaphosa made some of his toughest comments yet on Thursday, welcoming moves taken by prosecutors against companies accused of corruption, saying he wants to “deal with the rot”.

In emerging Europe the Czech crown underperformed its regional peers following the cabinet’s resignation, a day after losing a confidence vote.

Romania’s leu was also a touch weaker after compromise candidate Viorica Dancila was appointed PM-designate. The deal means the risk of a long drawn-out political crisis is averted.

Hungary will hold its first long-term interest rate swap tender today, aimed at encouraging long-term bank lending at lower interest rates. This is one of a number of unconventional easing measures from the central bank.

"One of the policies is a mortgage bond purchase programme which appears to be a form of quantitative easing, and the whole aim seems to be to drive down long-term bond yields," Jackson said. For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 1225.86 +3.24 +0.27 +5.82

Czech Rep 1112.97 -2.66 -0.24 +3.23

Poland 2602.08 +1.71 +0.07 +5.72

Hungary 39680.24 +136.98 +0.35 +0.77

Romania 8365.24 +48.65 +0.58 +7.89

Greece 840.68 -0.83 -0.10 +4.77

Russia 1269.00 +4.30 +0.34 +9.92

South Africa 54141.77 +72.93 +0.13 +3.06

Turkey 16847.74 +255.23 +0.22 +1.31

China 3475.91 +31.24 +0.91 +5.10

India 35268.48 +186.66 +0.53 +3.56

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2018

Czech Rep 25.39 25.36 -0.11 +0.54

Poland 4.16 4.17 +0.06 +0.30

Hungary 308.21 308.38 +0.06 +0.75

Romania 4.65 4.64 -0.08 +0.62

Serbia 118.40 118.30 -0.08 +0.00

Russia 56.72 56.81 +0.17 +1.66

Kazakhstan 324.56 326.16 +0.49 +2.54

Ukraine 28.78 28.67 -0.38 -2.21

South Africa 12.24 12.30 +0.49 +1.00

Kenya 102.80 102.80 +0.00 +0.29

Israel 3.43 3.44 +0.40 +1.49

Turkey 3.80 3.82 +0.47 -0.24

China 6.42 6.43 +0.17 +1.31

India 63.79 63.88 +0.14 +0.06

Brazil 3.22 3.22 +0.00 +2.74

Mexico 18.70 18.71 +0.08 +5.10

Debt Index Strip Spd Chg %Rtn Index

Sov’gn Debt EMBIG 292 -2 .02 8 09.84 1

Reporting and graphic by Claire Milhench Editing by Jeremy Gaunt

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