LONDON, Sept 6 (Reuters) - Emerging stocks rose on Friday, heading for weekly gains of 2 percent as markets adjusted to the idea of a withdrawal of U.S. monetary stimulus, though Polish stocks were on track for steep losses on concern over a pensions overhaul.
A reduction in the Federal Reserve’s money-printing programme is regarded as negative for flows to riskier assets. But emerging markets have largely priced in the start of tapering after the Fed’s mid-September meeting, analysts say.
Emerging markets also got a slight boost from plans announced by BRICS nations at this week’s G20 meeting to launch a $100 billion currency pool. Russia said on Friday the G20 communique would refer to slowing growth in developing economies.
The main focus was on U.S. employment data at 1230 GMT, expected to show the world’s biggest economy added 180,000 jobs last month.
“The markets will remain cautious ahead of the non-farm payrolls, that will give us one of the most decisive inputs ahead of the Fed’s decision in the middle of this month,” said Thu Lan Nguyen, emerging markets strategist at Commerzbank in Frankfurt. “The news about the BRICS countries pooling reserves created some short-term relief.”
The MSCI emerging equities index rose 0.25 percent to a 2-1/2 week high, and has retraced much of the recent 6 percent losses made on worries about a U.S.-led military strike on Syria.
Data released to clients late on Thursday showed, however, that dedicated emerging equity funds posted losses of $4.37 billion in the week to Sept. 4, rising from $3.9 billion in the week to Aug. 28.
Polish stocks rose more than 1 percent but were heading for losses this week of 6.5 percent, and Polish bond yields hit one-year highs after pension changes announced earlier this week.
Under Poland’s pension overhaul, private funds within the state-guaranteed system would have their bond holdings transferred to a state vehicle, but keep their equity holdings.
The worry is the changes will hurt the role of private funds which have a major influence in markets, with the reduction in demand for bonds hitting Poland’s weighting in global bond indices.
Emerging sovereign debt spreads tightened by 6 basis points to 368 bps over rising U.S. Treasury yields. Emerging market borrowers Mozambique, South Korea and Armenia have announced bonds or bond roadshows this week.
Emerging bond funds saw net redemptions of $1.69 billion, down from over $2 billion that fled in the previous week, banks said in research notes.
The Turkish lira steadied above the previous day’s record lows, with comments by central bank governor Erdem Basci last week that he would not raise interest rates keeping the currency under pressure. The rupee hit a one-week high, rebounding somewhat from recent record lows.
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