EM assets rise despite trade woes

Emerging market stocks and currencies found support yesterday from a soft dollar and a positive resumption of trading on Chinese markets after a week-long holiday.But optimism was tempered by concerns about the US-China trade talks and the fallout of Turkey’s military action in Syria. The Turkish lira barely made up its lost ground, edging up 0.3% following a 2.4% slump on Monday after US President Donald Trump threatened to destroy its economy if Ankara took a planned military strike in Syria too far.The contradictory message followed Trump’s decision on Sunday to pull 50 American special forces troops out of northeastern Syria, opening the door for a Turkish incursion.“There is a little bit of risk appetite coming, and this has helped the lira to a small bounce back,” said Antje Praefcke, FX and EM analyst at Commerzbank in Frankfurt. “The lira is generally under pressure because of the Syria issue, which is a risk.”Investors have been closely watching tense ties between Ankara and Washington in recent months, with the countries at odds over a range of issues, including Syria and Turkey’s purchase of a Russian missile defence system.Turkey’s sovereign dollar bonds slid further, while its main BIST 100 stock index, down about 2%, hit a two-week low. With few signs of progress in the US-China trade dispute, investors were cautious ahead of a round of crucial talks between trade officials this week.Indeed, the prospects of a deal dimmed after Washington on Monday blacklisted Chinese companies over Beijing’s treatment of predominantly Muslim ethnic minorities.Chinese stocks, however, closed modestly higher as a dim services sector survey reinforced hopes that Beijing will roll out more stimulus measures.Hong Kong-listed shares also a rose, despite concerns over violent protests, with shares in Hong Kong’s bourse HKEX up 2% after it scrapped its unsolicited $39bn approach for London Stock Exchange Group.South Korea was also a bright spot, with the Kospi jumping 1% after an upbeat forecast from the world’s biggest semiconductor firm Samsung Electronics. In emerging Europe, the Hungarian forint edged lower after data showed consumer inflation slowed to an annual 2.8% in September, below an expected 3% rise, according to a Reuters poll.