EM assets rise as tensions between North Korea, US ease
August 16 2017 08:47 PM


The Czech crown and Polish zloty jumped yesterday after strong economic growth data smashed forecasts, while emerging market stocks rose to a one-week high as tensions between North Korea and the United States eased.
Czech growth rose to 4.5% year-on-year in the second quarter, well above the 2.9% forecast.
The Czech crown leapt 0.4% against the euro to near two-week highs.
Central Europe’s biggest market, Poland, delivered 3.9% growth, beating forecasts and lifting the zloty 0.4% and shares in Warsaw 0.7%. Romania’s economy expanded 5.9%, also beating forecasts.
“It just shows that Central and Eastern Europe economies are benefiting from low interest rates in the rest of Europe and the fact that they have kept fairly solid macroeconomic policies,” said Jakob Christensen, head of emerging markets research at Danske Bank.
MSCI’s benchmark emerging stocks index was up 0.5%, also helped by gains in Asia after North Korean leader Kim Jong-un delayed a decision to fire missiles towards the US Pacific territory of Guam, as Pyongyang had previously threatened.
The United States said it was open to a dialogue, dialling down the warlike rhetoric which last week drove emerging stocks to one-month lows.
South Korean stocks rose 0.6% to one-week highs as markets reopened after Tuesday’s public holiday.
The won firmed 0.6% against the dollar, having hit its lowest in a month last Friday.
Even though upbeat US retail sales data have raised the chance of another rate rise by the Federal Reserve this year, Christensen said the fact that American consumers were spending was good news for export-oriented emerging markets.
The market is now awaiting the release of Fed meeting minutes to shed further light on the pace of tightening.
“We have a base case they will raise rates in December and announce quantitative tightening in September, but (the latter) will have a fairly benign impact on emerging markets as with the current pace of rate hikes it should be manageable,” he said.
Hong Kong shares rose 0.9%, India gained 0.7% and Indonesia rose 0.6% to a one-month high.
Indonesia’s president has proposed a 2018 budget based on economic growth of 5.4% next year, faster than the 5.2% target in 2017.
Chinese mainland shares underperformed, slipping 0.1% after new loans fell to an eight-month low in July, reinforcing views that economic growth will cool in coming months.
The yuan weakened a touch against the dollar as the central bank guided its official fixing to the lowest level in a week.
South Africa’s rand firmed 0.3%, extending Tuesday’s gains after a court rejected a proposal for the central bank to focus its monetary policy on boosting economic growth instead of fighting inflation and keeping the rand currency stable.
Moody’s said political tensions were still constraining South Africa’s growth.

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