Emerging-market stocks and currencies climbed to their highest levels in about a year, as reduced bets for US interest-rate increases and prospects for more stimulus in Asia spurred demand for higher-yielding assets.
Chinese shares in Hong Kong rallied after a private manufacturing index unexpectedly rose to the highest since February 2015.
Turkish equities rose for a fourth day, having recovered nearly half of the losses following a failed coup. Malaysia’s ringgit and South Korea’s won led gains in currencies, Bloomberg reported.
Investors added more than $2 billion to exchange-traded funds that buy emerging-market stocks and bonds last week. Polish bonds rose, with yields on 10-year debt falling to an eight-month low.
Equities and currencies are extending two months of gains after a report showed the US gross domestic product grew at less than half the pace forecast by analysts, fueling bets the Federal Reserve will refrain from raising rates.
Japanese Prime Minister Shinzo Abe may unveil details of his fiscal package on Tuesday after the Bank of Japan added to its easing last week, and economists forecast policy rates in Australia and England will be cut further from record lows this week.
“Lower for longer is good for higher-yielding assets, such as emerging-market equities and it prevents a rising dollar,” said Nathan Griffiths, who helps oversee about $1.1 billion as a senior money manager at NN Investment Partners in The Hague.
“It also leads to a better growth differential for emerging markets over developed markets.”
Futures signal a 39% chance of higher US rates by yearend, down from 48% a week earlier. The first month where traders see better-than-even odds for an increase has been pushed back to September 2017 from March.
Exchange-traded funds that buy emerging-market stocks and bonds are on a nine-week winning streak with a record $12.9 billion invested.
