Emerging market equities gain

Emerging market equities rose yesterday after US Federal Reserve minutes suggested a rate hike was unlikely in September, nearing one-year highs reached earlier this week, while EM currencies benefited from a weaker dollar.The benchmark emerging stocks index was up 0.8%, recovering from a 0.6% dip on Wednesday after hawkish comments from Fed officials William Dudley and Dennis Lockhart.But investors were cheered by the minutes released late on Wednesday which showed policymakers were still divided over whether to raise rates.“Dudley’s comments earlier this week caught markets by surprise, so when the FOMC minutes came out it was a bit of a relief – I think he made those comments to check market sentiment and make sure they weren’t running ahead too far,” said Per Hammarlund, chief emerging markets strategist at SEB.He added that the momentum in the market had regained strength in recent weeks as more investors had become convinced that the EM rally was sustainable.Asian markets set the tone, with Hong Kong shares up around 1%, Indonesia up 1.5% and Korea up 0.6%.These strong performers put Asian stocks on track for their biggest single-day rise in nearly two weeks, despite a small fall in Chinese mainland shares.The upbeat mood extended into most European markets with Russian dollar-denominated stocks up 1.2%, Turkish stocks up 0.8% and Prague shares up 0.3%. South African stocks rose 0.6%.Emerging market currencies were helped by dollar weakness, which gave up 0.24% against a basket of currencies.High yielders such as the South African rand firmed 0.8%, whilst the Russian rouble strengthened 0.4% to a four-week high, supported by a gain in oil prices back towards $50 a barrel.The Kazakh tenge firmed 0.6%. Ukraine’s hryvnia remained under pressure as tensions with Russia simmered, weakening 0.3% against the dollar. The Polish zloty was steady against the euro ahead of a raft of data, whilst the Hungarian forint firmed 0.2%.Zambia’s benchmark 2027 eurobond remains firm near the 12-month highs it hit on Tuesday following the re-election of President Edgar Lungu.However, the main opposition party is challenging the win, alleging vote-rigging.