Emerging equities rose 0.8 per cent on Monday, buoyed by robust factory activity data in Europe and Asia, and reports that a fine imposed on Germany’s Deutsche Bank may be smaller than initially feared.
The benchmark emerging equity index rose off 10-day lows hit on Friday, tracking developed market gains after a report said Deutsche Bank and the United States Department of Justice were close to agreeing a settlement of $5.4bn, well below the initial $14bn demand, according to Reuters.
The threat of a fresh European banking crisis had pushed Deutsche Bank shares to record lows last week, dragging on European and emerging market sentiment.
Robust manufacturing activity data across emerging markets also lifted investor sentiment, with Hungary, Poland, China, Indonesia and Taiwan performing strongly.
“Overall this goes with our view that emerging markets are doing fairly well – the tide has to some extent turned,” said Jakob Christensen, head of emerging markets research at Danske Bank in Copenhagen.
Mainland China was closed for a week-long holiday but Hong Kong gained 1.2 per cent and Indonesia shares rose 1.7 per cent after export orders touched a four-year high.
Taiwan shares also rose 0.7 per cent after September factory activity hit a two-year high.
The strong Asian performance was echoed across emerging Europe, where Budapest shares rose 0.7 per cent after factory activity touched its highest September figure since 1995, although this survey tends to be volatile.
The forint weakened slightly against the euro, however, following a referendum on Sunday in which a majority rejected the European Union’s migrant quotas, although low turnout made the poll invalid.
Polish stocks rose 0.5 per cent, with factory activity expanding at the fastest pace in six months , while Russian dollar-denominated shares rose almost 1.2 per cent after Russian manufacturing was boosted by the sharpest rise in output in nearly two years.
“Clearly the fairly strong macro economic management, together with higher oil prices, is bringing some results (for Russia) and we are looking for positive growth possibly in Q4 and definitely in 2017,” said Christensen.
The Russian rouble firmed 0.8 per cent against the dollar, helped by a rise in oil prices of almost one percent to above $50 a barrel.
The Kazakh tenge also firmed 0.3 per cent before an interest rate review that could cut rates by 50 basis points to 12.5 per cent. The central bank has cut rates twice this year by 200 basis points each time.
South African telecoms stock MTN fell one percent and its 2024 Eurobond was down 0.9 cents to the lowest since end-June following a downgrade by Standard & Poor’s on Friday to BB+ from BBB-.
The company has denied allegations it illegally repatriated $13.92bn from Nigeria, its biggest market, where it also faces a fine in a dispute over unregistered SIM cards.
Overall South African shares slipped 0.2 per cent but the rand firmed 0.7 per cent against the dollar.
Turkish stocks rallied 1.2 per cent but the lira slipped 0.23 per cent after consumer and producer prices rose less than expected.
Tim Ash, an analyst at Nomura, said the data would help the central bank justify its rate-cutting stance and perhaps also lay the way for further easing.
“The (central bank) likely will continue cutting rates and selling this as ‘simplification’ until it unifies its main policy rates.”
Colombian dollar bonds fell around one cent across the curve after voters rejected a peace deal with Marxist FARC guerrillas, plunging the nation into uncertainty.
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