World Economy

Emerging Stocks Hold At One-Year Highs

Emerging Stocks Hold At One-Year HighsEmerging Stocks Hold At One-Year Highs

Emerging market equities touched fresh one-year highs on Tuesday as investors continued their hunt for yield in riskier assets and relatively benign Chinese inflation data allayed fears of deflation in the world’s No. 2 economy.

The benchmark emerging equity index rose 0.3% after Chinese factory prices fell at their slowest pace in two years, soothing worries about a sharp growth slowdown, CNBC reported.

“China is doing fairly well, and that was what we expected,” said Jakob Christensen, head of EM research at Danske Bank. “Construction activity in China is fairly good.” At the same time, consumer inflation remained well below China’s official target of around 3%, keeping the door ajar for further monetary easing and boosting investor sentiment.

“Growth is okay in many emerging markets and inflation pressures are under control—that allows many emerging markets to lower interest rates which is good for stocks and growth,” Christensen added.

Chinese mainland stocks rallied 0.7%, and some other Asian markets also rose, with South Korean shares up 0.6% to touch nine-month highs.

The rally extended into some European markets, with Turkish stocks up 0.7% to their highest since mid-July, helped by a thaw in relations with Russia, while Russian dollar-denominated stocks rose 0.3%.

The Turkish lira firmed around 0.15% against the dollar and Turkish five-year credit default swaps fell 18 basis points from Monday’s close to 229 bps, the lowest level since July 18.

The Indian rupee came under pressure, easing as much as 0.2% against the dollar after India’s outgoing central bank governor Raghuram Rajan kept rates unchanged at 6.5%.

But other currencies made gains, with the South African rand firming almost 0.4% to 10-month highs.