LONDON, Nov 2 (Reuters) - Emerging stocks clung to two-week highs on Thursday and the Czech crown hit a fresh four-year high against the euro as markets bet that the central bank in Prague would hike rates for the second time this year.
MSCI’s benchmark emerging stocks index has been underpinned by positive growth momentum in both developed and emerging markets, with manufacturing activity data showing continued expansion, albeit at a slower pace.
In the latest data, Poland and Hungary factory activity growth slowed slightly in October, but Poland remained on track for its best annual performance in seven years as new orders flooded in.
Budapest stocks rallied 1.35 percent, partly playing catch up after a closure for a public holiday on Wednesday. Turkish stocks also rose 1 percent, with automotive shares leaping ahead of the unveiling of a car project announcement.
However, bourses in Asia, Russia and Poland chalked up losses.
Currencies fared better after the dollar came under pressure following a one-day delay to the unveiling of a key U.S. tax reform bill.
Adding to the dollar’s woes were market expectations that Jerome Powell will be chosen as the next chair of the U.S. Federal Reserve, which kept U.S. Treasury yields under pressure. Powell is expected to continue with the Fed’s cautious pace of tightening.
The South African rand bounced 0.6 percent to a one-week high, though that came in the wake of underperformance. The rand was hit hard last week after South Africa raised its estimate for this year’s budget deficit to an eight-year high.
Russia’s rouble and Turkey’s lira both chalked up solid gains against the dollar.
Meanwhile the Czech crown cemented its position as this year’s top performing mainstream currency ahead of a central bank meeting later in the day, hitting a fresh four-year high against the euro.
All 16 analysts in a Reuters poll have projected a rate hike, with all but one expecting a 25 basis points rise, and the other forecasting a 50 basis point hike.
“The Czech crown has been the stand out performer – in the region it probably has the strongest balance of payments position,” said Koon Chow, emerging markets macro and FX strategist at UBP.
“Also the central bank is quite conventional, so when growth and inflation are picking up they are hiking ... All the stars are aligned for a positive (crown).”
He added that stronger business cycle data was underpinning eastern European currencies. Czech manufacturing business sentiment jumped to its highest in more than six years in October.
Elsewhere, Bahrain’s five-year credit default swaps rose 1 basis point (bp) from Wednesday’s close to 250 bps, according to IHS Markit, the highest level since mid-January, after media reports that it had asked its Gulf allies for aid.
Venezuela’s state oil firm PDVSA is due to make a payment as its 2017 bond matures today. With some bondholders having received the payment for PDVSA’s 2020 bond that came due last week, this has allayed fears of non-payment.
"There is a more than even probability that they do (pay), given that they made last week's payment," said Chow. 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
Morgan Stanley Emrg Mkt Indx 1129.12 +0.18 +0.02 +30.95
Czech Rep 1066.80 -0.91 -0.09 +15.75
Poland 2514.05 -10.85 -0.43 +29.06
Hungary 40139.31 +527.67 +1.33 +25.42
Romania 7827.81 +37.48 +0.48 +10.48
Greece 764.48 -2.59 -0.34 +18.77
Russia 1123.98 -2.45 -0.22 -2.46
South Africa 52928.45 -128.14 -0.24 +20.56
Turkey 14235.50 +1211.23 +1.07 +46.20
China 3383.14 -12.77 -0.38 +9.01
India 33576.59 -23.68 -0.07 +26.10
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.56 25.56 -0.00 +5.65
Poland 4.23 4.23 -0.04 +4.02
Hungary 310.54 310.77 +0.07 -0.55
Romania 4.60 4.60 +0.11 -1.35
Serbia 118.75 118.82 +0.06 +3.87
Russia 58.13 58.26 +0.21 +5.38
Kazakhstan 334.92 335.30 +0.11 -0.38
Ukraine 26.93 26.87 -0.22 +0.26
South Africa 13.97 14.06 +0.58 -1.74
Kenya 103.65 103.60 -0.05 -1.23
Israel 3.50 3.51 +0.21 +9.89
Turkey 3.81 3.81 +0.18 -7.31
China 6.61 6.60 -0.09 +5.07
India 64.65 64.56 -0.13 +5.10
Brazil 3.27 3.27 +0.00 -0.43
Mexico 19.05 19.06 +0.09 +8.77
Debt Index Strip Spd Chg %Rtn Index
Sov’gn Debt EMBIG 304 0 .05 8 06.26 1
Editing by Matthew Mpoke Bigg