Emerging market currencies rebound with oil before Yellen speech

Business Wednesday 10/February/2016 17:48 PM
By: Times News Service
Emerging market currencies rebound with oil before Yellen speech

Bangkok: Currencies of developing nation rose for the first time in four days as crude oil rebounded and investors awaited United States Federal Reserve chair Janet Yellen’s speech for clues about the strength of the US economy.
Indonesia’s rupiah climbed to a four-month high as the nation’s improving economic outlook lured inflows. Russia’s rouble and South Africa’s rand advanced as oil and a Bloomberg gauge of commodities snapped four days of losses.
Most emerging-market stocks fell as India was set to enter a bear market, while shares in Hungary, Turkey and Abu Dhabi rose. Markets in China, Hong Kong, Taiwan, South Korea, and Vietnam remained closed for holidays.
Investors are focusing on Yellen’s semi-annual testimony to Congress starting on Wednesday for signals on the likely pace of US monetary tightening after a volatile start to the year amid concerns about China’s ability to manage its economic slowdown. The speech follows Bank of Japan’s surprise shift to negative interest rates in late January and the European Central Bank’s signal it will deploy new stimulus next month.
“Any indication of a weakening US economic outlook will probably add to the selling pressure on global equities because the US is currently the only driver of world growth,” said Tawatchai Asawapornchai, deputy managing director at ASL Securities, a brokerage in Bangkok. “Some equities have very attractive valuations, and we advise our clients to hunt for bargains if they fall further. Energy and commodity stocks should be avoided because of the uncertainty over oil prices.”
Currencies
A Bloomberg gauge of 20 developing-nation currencies rose 0.4 per cent in London, led by 1.2 per cent gain in the rand and a 1.1 per cent jump in the rupiah. The Indonesian currency climbed as much as 1.5 per cent to the highest since October 15 a day after a central bank official said the authority, which cut its policy rate for the first time in 11 months in January, sees room for monetary easing and that growth can be higher in 2016 after expansion in the fourth quarter beat analysts’ expectations.
Overseas investors pumped 9.5 trillion rupiah ($702 million) into Indonesian local-currency sovereign debt last week, Finance Ministry data show, taking inflows this year to 29.3 trillion rupiah. The economy expanded 5.04 per cent in the fourth quarter from a year earlier, compared with a revised 4.74 per cent in the previous three months and the 4.8 per cent median estimate in a survey.
Indonesia is considering opening up previously closed sectors of the economy to foreign capital to make up for weaker export performance and drive economic growth in Indonesia to as fast as 5.2 per cent this year, Trade Minister Tom Lembong said in an interview on Tuesday.
The stimulus measures by Indonesian authorities, the prospect of further cuts in local borrowing costs and diminishing expectations of U.S. rate increases are positive for the rupiah, said Roy Teo, a senior foreign-exchange strategist at ABN Amro Bank in Singapore.
The rouble advanced 0.8 per cent, Malaysia’s ringgit gained 0.6 percent. Thailand’s baht and Philippines peso rose about 0.4 per cent each, while India’s rupee was little changed.
The FTSE Bursa Malaysia KLCI Index dropped 0.7 per cent to a one-week low, while Turkey’s Borsa Istanbul 100 Index climbed 0.9 per cent.
The MSCI Emerging Markets Index snapped a two-day drop to gain 0.2 per cent, helped by gains in consumer goods, telecommunications and banking shares. Even so, almost two stocks fell for each that rose. The measure has retreated 7.9 per cent this year and is valued at 10.7 times projected 12-month earnings of its members, compared with a multiple of 14.3 for the MSCI World Index that has declined about 11 per cent in 2016.
Bonds
Thailand’s sovereign bonds rose, with the 10-year yield falling three basis points to a record 2.23 per cent, according to data. The comparable yield in Indonesia fell two basis points to 8.02 per cent, and rose five basis points in Russia to 10.31 per cent.