Emerging-Market Stocks Rise on ECB Signals; Currencies Mixed

  • Brazilian real advances, while Turkish lira declines
  • Russian equities jump as Rosneft surges on Glencore deal

EM Outperformed in Massive Way in 2016: Rooney Vera

Emerging-market stocks rallied the most in a month as the European Central Bank signaled it stood ready to add to stimulus after a decision to cut its monthly pace of bond buying.

  • The MSCI Emerging Market Index gained 1.4 percent, its biggest advance since Nov. 7
  • Russian stocks climbed the most among major equity markets after the government sold an $11 billion stake in the nation’s biggest oil company
  • The MSCI EM Currency Index rose 0.2 percent, rebounding from Thursday’s lows
  • Brazilian real advanced, while Turkish lira declined


The ECB’s Governing Council will slow down its bond-buying program in April to a monthly speed of 60 billion euros ($65 billion) from 80 billion euros currently, according to a statement in Frankfurt on Thursday. ECB President Mario Draghi denied a "taper" is in place and said quantitative easing is open-ended and inflation will remain too feeble well past the supposed new end-date.

Reaction

"The statement is pretty open-ended and leaves the possibility of increased size or duration later if needed,” said Shamaila Khan, a money manager in New York at AllianceBernsteinLP, which oversees about $490 billion. “Also the amount of purchases is lower but for longer. There may be a short-term impact as the market digests the news but overall it should not derail the emerging-market story."

“The initial reaction was seen as negative due to the tapering word but at the end of the day the QE will be larger and so it is positive EMs,” Credit Agricole SA’s Paris-based strategist Guillaume Tresca said by e-mail. “It is the difference between stock and flows. Flows will be lower (tapering EUR60 vs EUR80bn) but the global amount of bonds bought by the ECB will be larger, so net/net, it is positive.”

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