- Bank of America sees ‘relentless buying again’ after Fed, BoJ
- Lira falls as Erodgan says he’s not worried about rating cut
Emerging-market stocks posted their biggest weekly advance in two months as pledges from global central banks to sustain stimulus rekindled demand for riskier assets in developing nations.
Profit-taking on Friday after a 4 percent rally in the previous four days trimmed the MSCI Emerging Markets Index’s weekly gain to 3.6 percent. A measure of raw-material stocks in developing nations was the best performer during the period, advancing 4.8 percent. The Turkish lira trimmed its weekly advance after President Recep Tayyip Erodgan said he isn’t worried about a possible cut to junk of the country’s credit rating.
Accommodative monetary policy from the Federal Reserve and the Bank of Japan this week reignited appetite for developing-markets assets. While near-zero rates in advanced economies will continue to push investors to higher-yielding securities, many are now becoming more selective, according to David Hauner, a strategist at Bank of America.
“We have seen relentless buying again on the back of the Bank of Japan and the Fed,” Hauner said. “There is some profit-taking today from those who have caught this rally and want to go home on Friday with a cleaner book. Short term I think we’ll get a bit of a pickup in volatility as the focus is now shifting toward the U.S. elections.”
The emerging-market equity benchmark has risen 16 percent this year, outperforming the MSCI World Index, which has climbed 4 percent. The developing-nation measure is valued at 12.7 times the projected 12-month earnings of its members, compared with a multiple of 16.2 for stocks in developed markets.
Equity gauges in Thailand, Russia and Poland were among the worst performers Friday, while a gauge of mainland Chinese stocks traded in Hong Kong slid for the first time in six days. Benchmarks in South Korea and Taiwan and South Africa each advanced at least 0.2 percent.
The Ibovespa fell 0.5 percent in Sao Paulo, led by a 3.7 percent drop in the Brazilian state-controlled oil producer Petroleo Brasileiro SA. A gauge of developing-nation energy stocks slid 0.4 percent. Brent crude tumbled 3.7 percent to $46.08 a barrel after Saudi Arabia was said to dismiss the prospects for an output agreement to stabilize the market in talks in Algiers next week.
The MSCI Emerging Markets Currency Index slipped 0.1 percent, reducing the weekly advance to 1.2 percent.
The Malaysian ringgit and Singapore dollar each fell at least 0.1 percent. The Taiwanese dollar strengthened 0.2 percent. Poland’s zloty declined 0.5 percent against the euro as a measure of manufacturing output from the euro-area was weaker than forecast, suggesting growth is slowing in Europe.
The lira weakened 0.4 percent and 10-year Turkish bonds yields increased 7 basis points to 9.51 percent. The yield on comparable Russian 10-year notes rose 9 basis points to 8.2 percent.
Chinese bonds rose, pushing the yield on 10-year debt down two basis points to 2.74 percent, the lowest this month.