LONDON, April 20 — Emerging markets got off to a choppy start today following China’s surprise policy easing move at the weekend, although equities and currencies in Russia and central Europe traded firmer.
China’s central bank yesterday cut the amount of cash banks are required to hold in an effort to boost lending power and bolster growth. The move initially lifted shares and currencies across Asia, though most traded lower later in the session.
The MSCI emerging stocks index slipped 0.5 per cent while the Asian ex-Japan benchmark fell 0.9 per cent, with Hong Kong’s Han Seng ending 2 per cent down.
“It’s been an underwhelming reaction so far,” said UBS strategist Manik Narain.
“Further stimulus was anticipated from China as we had weak first-quarter sequential growth that was well shy of government targets. The other factor is that the market is questioning the sectors at which the stimulus is targeted,” he added.
Main indexes across south and eastern Europe gained, with the Czech Republic and Poland adding around half a per cent, while Hungary and Greece rose well above 1 per cent.
Russia chalked up the biggest gains, with its dollar-denominated index jumping 2.4 per cent, helped by higher oil prices. The rouble strengthened 0.8 per cent against the dollar after a sharp fall on Friday
Russian Central Bank deputy governor Ksenia Yudayeva wrote on Monday that the rouble would likely fluctuate in the medium-term, but without big changes to oil prices or sanctions against Russia, it should remain stable around current levels.
The Polish zloty snapped a four-day losing streak versus the euro, rising 0.5 per cent as analysts predicted that 1200 GMT data would show a pickup in industrial output and retail sales.
In Hungary, the forint eased 0.2 per cent against the euro ahead of a central bank meeting on Tuesday, but stayed close to 16-month highs. The bank is widely expected to shave another 15 basis points off interest rates, responding to sub-zero inflation and currency strength.
“The (forint) has strengthened against the euro to a point where it’s threatening Hungary’s export competitiveness,” SEB analysts wrote in a research note. “The upward trend that started last week in euro/forint has thus been welcomed.”
In Romania, the leu traded flat against the euro while shares fell 0.6 per cent as Central Bank Governor Mugur Isarescu said the country’s macroeconomic indicators were at the best he had seen in 25 years and interest rates were at the right level, but minimum reserve requirement levels were not.
Turkey’s lira, Israel’s shekel and India’s rupee all traded around half a per cent lower against the greenback. The dollar was up 0.25 per cent versus a basket of currencies. — Reuters
