EMERGING MARKETS-Stocks recoup losses, Fed headwinds stay on FX
LONDON, Aug 30 (Reuters) - Emerging market stocks bounced on Tuesday as investors shrugged off the previous session's U.S. rate hike nerves but currencies including the rand and the lira struggled to make headway in the face of a stronger dollar.
The benchmark emerging markets stock index clawed back all of the 0.6 percent lost on Monday in response to Fed Chair Janet Yellen's Jackson Hole speech in which she said the case for a rate rise had strengthened.
Danske Bank's head of EM research, Jakob Christensen, said the market had "shrugged off" its initial concerns, pointing out Yellen had also indicated that the longer term rate would be significantly lower than previously thought.
"A 25-50 basis point rise won't rock the boat if the Fed is going to be more gradual about its rate hike cycle and more cautious," he said.
Both Asian and emerging European stock markets made decent gains, with Hong Kong up 0.8 percent, India up more than 1 percent, Russian dollar-denominated stocks up 0.7 percent and Polish shares up 0.9 percent.
But with the dollar firming 0.2 percent against a basket of currencies, EM currencies delivered a more mixed performance.
The rand, which fell by more than 1 percent against the dollar on Monday, extended losses by 0.5 percent to trade near six-week lows, still affected by news of possible charges against Finance Minister Pravin Gordhan.
Police have summoned Gordhan, who is popular with investors and businesses, to answer questions in an ongoing investigation. On Monday, central bank deputy governor Daniel Mminele said the bank would not respond to short-term volatility triggered by these developments.
South Africa's 2025 dollar-denominated bond slipped 0.4 cents, trading at one-month lows.
The Turkish lira was another of the big fallers, weakening 0.25 percent, which Christensen said reflected concerns about its large current account deficit in an environment where the Fed looks set to tighten.
"It's more vulnerable than other EMs and this is weighing on the lira," he said. "Other EMs are in surplus now, but Turkey hasn't been able to improve their deficit much partly because of the sanctions from Russia and the decline in tourism revenues."
Turkish-backed forces pushed deeper into Syria on Monday, earning a rebuke from the United States.
Poland's zloty was a touch firmer against the euro, just off a four-week low hit on Monday, but still hampered by tensions between Poland and the European Union over the rule of law and a government drive to boost its influence in the banking sector.
Deputy Prime Minister Mateusz Morawiecki said on Monday that the row over a constitutional tribunal, which triggered a downgrade in Poland's ratings in the debt markets, was "just a political game," and repeated that he would be happy if Poland increased its control over the banking sector.
Data also confirmed that investment was down almost 5 percent year-on-year underscoring the growing uncertainty.
Further east, news that Uzbekistan's president Islam Karimov had suffered a brain hemorrhage raised succession questions in Central Asia's most populous country.
"Russia is likely to want to have a big say in the succession given that it considers Uzbekistan as in its 'backyard'," Nomura International analyst Tim Nash said, noting that Karimov's succession was also important to Kazakhstan.
For GRAPHIC on emerging market FX performance 2016, see http://link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see http://link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see http://link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see http://link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
on year
Morgan Stanley Emrg Mkt Indx 900.69 +4.72 +0.53 +13.42
Czech Rep 856.04 +3.10 +0.36 -10.49
Poland 1788.91 +11.56 +0.65 -3.78
Hungary 28024.76 +102.84 +0.37 +17.16
Romania 7002.61 +4.10 +0.06 -0.02
Greece 563.67 +1.98 +0.35 -10.72
Russia 968.85 +6.77 +0.70 +27.98
South Africa 46883.99 -28.47 -0.06 +2.37
Turkey 76118.84 -1000.81 -1.30 +6.12
China 3076.20 +6.17 +0.20 -13.08
India 28251.75 +349.09 +1.25 +8.17
Currencies Latest Prev Local Local
close currency currency
% change % change
in 2016
Czech Rep 27.02 27.01 -0.02 -0.08
Poland 4.34 4.34 +0.02 -1.85
Hungary 308.73 308.35 -0.12 +1.91
Romania 4.45 4.45 +0.10 +1.66
Serbia 123.13 123.20 +0.06 -1.35
Russia 64.89 64.77 -0.18 +12.43
Kazakhstan 339.06 339.06 +0.00 +0.42
Ukraine 25.67 25.53 -0.55 -6.69
South Africa 14.46 14.40 -0.39 +6.95
Kenya 101.25 101.25 +0.00 +0.94
Israel 3.78 3.79 +0.05 +2.75
Turkey 2.96 2.95 -0.25 -1.37
China 6.68 6.68 -0.01 -2.79
India 67.06 67.10 +0.07 -1.28
Brazil 3.23 3.23 +0.09 +22.72
Mexico 18.65 18.62 -0.19 -7.94 (Editing by Louise Ireland)
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