EM stocks rise to one-month high

Emerging equities rose to one-month highs yesterday, their fifth straight day of gains, after better-than-expected Chinese import data boosted commodity prices and markets continued to price out a June US interest rate rise.MSCI’s benchmark emerging equities index was up around 0.4% as the import data pointed to improving domestic demand in China and cemented views that the economy may be slowly stabilising.“It’s the stimulus that was initiated late last year - it’s starting to show up in the data, and affect China’s trading partners.The markets are reacting positively to that,” said Per Hammarlund, chief emerging markets strategist at SEB.The central bank predicted a second straight annual fall in exports but still said 6.8% economic growth this year.China’s May crude oil imports jumped the most in over six years, iron ore imports were the highest since December and copper purchases were up more than 19%.This lifted commodity prices, with oil rising to over $51 a barrel to touch eight-month highs, whilst copper revived from two-week lows. This in turn boosted commodity-reliant emerging markets, with Russian dollar-denominated stocks up 0.4% to one-month highs.The Russian rouble opened slightly firmer against the dollar but remains near two-week lows ahead of Friday’s central bank meeting at which some market participants expect the first rate cut in almost a year.The yield on the Russian 10-year local bond is approaching two-year lows. Chinese mainland stocks slipped 0.4% amid weak volumes ahead of a long weekend. But other Asian markets bounced, with Korea, climbing 0.8% to close at its strongest level so far this year, whilst Taiwan rose 0.4%.The Korean won also rose to a five-week high against the dollar, with the government and central bank announcing plans for a $9.5 bn fund to support two state-run banks exposed to the country’s struggling shipyard sector.The dollar has fallen to one-month lows as weak USjobs data on Friday and cautious comments from Fed chair Janet Yellen hit expectations of a rate rise in June or July.In emerging Europe, Prague shares tumbled 2.5 %, led by a 6.5 % fall in index heavyweight CEZ after the utility stock traded for the first day without a right to its dividend. Budapest stocks inched to eight-year highs, shrugging off a 15 % fall in lender FHB Bank which was fined by regulators for alleged market manipulation.The Polish zloty firmed 0.2 % against the euro to its strongest level since mid-April.This followed Tuesday’s proposals that the cost to Polish banks of solving borrowers’ Swiss franc mortgage problems should be spread over 30 years or so.The Polish central bank yesterday held rates at a record low of 1.50%, in line with the expectations of analysts polled by Reuters.The Hungarian forint was flat near five-week highs against the euro after posting a better-than-expected trade surplus in April.But the Croatian kuna weakened 0.17% against the euro, after the biggest party in the ruling coalition filed a no-confidence motion against Prime Minister Tihomir Oreskovic, calling for him to step down.The South African rand weakened 0.1% against the dollar, retreating from Tuesday’s one-month highs ahead of first quarter GDP data which is expected to show that the economy is continuing to contract.