Friday 27 / December / 2024
London: Emerging-market stocks trimmed the worst weekly drop since 2012 and currencies rose after China suspended a controversial circuit-breaker system that sparked a selloff in mainland shares and moved to stabilise the yuan.
Energy shares rebounded with oil as the MSCI Emerging Markets Index climbed from a six-year low. The Shanghai Composite Index rallied after people familiar with the matter said state-controlled funds bought equities. Hong Kong’s Hang Seng China Enterprises Index halted a four-day drop. A gauge of developing-nation currencies increased from a record low, led by the Indian rupee. Eastern European stocks advanced.
About $1.5 trillion was erased from the capitalisation of the 31 largest emerging equity markets this year through Thursday as China abandoned a system of market circuit breakers after plunges closed Chinese trading early twice this week.
China’s central bank also set its reference rate little changed from Thursday’s fixing after an eight-day run of reductions ignited fears of competitive devaluations among developing nations, rattling investors already concerned about slowing growth in Asia’s biggest economy.
“It’s a temporary rebound, so too early to sound the all clear,” said Michael Wang, a strategist at hedge fund Amiya Capital in London. “Valuations are getting cheaper but I’m not getting a strong signal to buy yet. We need to see stability in oil prices and China.”
The 14-day relative-strength index for emerging equities has traded below 30 for three days, the threshold that signals to some technical analysts that an asset is poised to rebound. The measure touched 22.4 on Thursday, the lowest since August.
Following this week’s 6.6 per cent drop, developing-nation stocks trade, on average, at 10.5 times projected 12-month earnings, near the cheapest since September and a 30 per cent discount to advanced-country shares in the MSCI World Index, according to data.
Brent crude is on course for a 9.1 per cent weekly retreat that dragged it to 12-year lows. Currencies in South Africa, Turkey and Russia weakened at least 1.6 per cent against the dollar in the five days. Investors will be watching United States payrolls data on Friday for clues on the timing of interest rate increases that could affect demand for riskier assets.
The MSCI Emerging Markets Index climbed 0.4 per cent to 742.12 in London as nine out of 10 industry groups gained, led by energy stocks. China Petroleum & Chemical Corporation jumped 5.6 per cent in Hong Kong, rebounding from the lowest close since April 2009, and Sasol increased 1.8 per cent in Johannesburg. Brent crude climbed for the first day this year, adding 0.3 per cent to $33.85 a barrel.
The Hang Seng China Enterprises measure rose 1.1 per cent, after sliding to the lowest level since October 2011 on Thursday. The Shanghai Composite added 2 per cent, reducing its weekly decline to 10 per cent, still its biggest loss since August. State-controlled funds purchased Chinese stocks on Friday, focusing on financial shares and others with large weightings in benchmark indexes, according to people familiar with the matter.
Sino Biopharmaceutical plunged 20 per cent in Hong Kong, the biggest decline among emerging-market shares, after agreeing to pay 4.9 billion yuan ($744 million) for shares in China Cinda Asset Management.
Equity indexes in emerging Europe rallied, with Hungarian and Czech stocks adding at least 1.4 per cent. The Borsa Istanbul 100 Index climbed 0.7 per cent in its fourth day of gains. Russian markets were closed for a public holiday.
Currencies
A measure tracking 20 emerging-market currencies gained for the first time in the new year, rising less than 0.1 per cent. The index dropped 1.6 percent this week, the sharpest retreat since the period ended December. 11.
The onshore yuan was little changed at 6.5923. The People’s Bank of China set the daily fixing, which restricts onshore moves to a maximum 2 per cent on either side, at 6.5636 a dollar, 0.02 per cent stronger than the previous day’s reference rate. It was cut 1.42 per cent over the last eight days.
