Emerging-market stocks headed for the biggest two-day rally since August as investors bet some of the world’s biggest central banks will boost stimulus to prop up assets.
All 10 sectors in the MSCI Emerging Markets Index rose, led by industrial shares, extending an advance on Friday that was the biggest since August. Russia’s equities gauge fell as Brent crude resumed its descent after being up earlier in the day. The ruble and Mexico’s peso pushed a measure of emerging-market currencies down for the first time in three days, while most Asian exchange rates strengthened, Bloomberg reported.
Growing speculation central banks will cut or avoid raising interest rates buoyed Asian markets in the midst of the worst start on record for global stocks. European Central Bank President Mario Draghi signaled Thursday that stimulus measures may be boosted as early as March. And while China’s economy is decelerating, it won’t be a cataclysmic slowdown, according to attendees at last week’s World Economic Forum in Davos, Switzerland, including Nobel laureate Joseph Stiglitz and Credit Suisse Group AG Chief Executive Officer Tidjane Thiam.
Stocks
The MSCI Emerging Markets Index rose 0.9% to 716.97 in Hong Kong. The gauge has fallen 9.7% this year and is trading at 10.5 times its projected 12-month earnings, compared with 14.8 for the MSCI World Index. Hong Kong’s Tencent Holdings Ltd. provided the biggest boost, rising 3.8%, followed by China Mobile Ltd. with a 1.3% increase.
The Hang Seng China Enterprise Index of mainland shares in Hong Kong closed up 0.8%, as did the Shanghai Composite Index. The gauge, whose gyrations at the start of the year sparked the global selloff, ended up 1.3% on Friday as China signaled it would curb overcapacity in industries such as coal that have been dragging down economic growth.
Russia’s benchmark share measure fell 1% after rallying more than 5% over the previous two days. Taiwan’s main gauge closed up by 1.8%, Indonesian shares increased 1.1% and South Korea’s Kospi index rose 0.7%.
Currencies
The developing-nation currencies gauge fell 0.2%, following a 1% jump on Friday after it fell to an unprecedented low two days earlier. The ruble dropped 1.2% after a 5.6% surge on Friday, Mexico’s peso was down 0.7% and Turkey’s lira weakened 0.4%. The won closed up 0.5% before a report that showed South Korea’s economic growth quickened last quarter from a year earlier. Romania’s leu strengthened 0.4%. Brent crude dropped 3.5% after rallying 15% over the previous two days.
The offshore yuan fell for a fifth day, taking its decline this year to 0.7%. The onshore currency has lost 1.3% in 2016.
Chinese sovereign bonds fell on speculation the central bank will be cautious in cutting lenders’ reserve requirements amid depreciation pressure on the yuan. The 10-year yield rose 10 basis points to 2.88% in the biggest increase since November.
The yield on similar-maturity Philippine securities dropped five basis points to 4.30%, while that on South Korean notes fell two basis points to 2.02%.
