NEW YORK, March 29 — Emerging-market currencies headed for the best quarterly gain in four years and stocks are set for the biggest three-month advance since June 2014 as inflows return amid a more conservative Federal Reserve.
South Korean and Taiwanese shares attracted a total of more than US$7 billion (RM27.98 billion) this month, stock exchange data show. Developing-nation equities lured US$2.7 billion in the week to March 23, the most in eight months, Kenneth Chan, a quantitative strategist at Jefferies Hong Kong Ltd., wrote in a note.
Some key events this week could determine whether those inflows will continue to sustain an emerging-market rally. US jobs data may provide greater insight on Friday as to when the Fed is likely to next hike rates, and a Chinese manufacturing report the same day may give a clearer picture on the health of the world’s second-biggest economy. Oil prices dropped back below US$40 a barrel today, making for volatile trading across markets.
“It’s hard for this trend to last,” said Sean Yokota, the head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “The main thing is the lack of growth, even in the US On Asia’s side, China’s data has still been weak as well. Until these start to get stronger, it’s hard for emerging markets to continue to do well.”
Currencies
Malaysia’s ringgit led gains in Asian emerging-market currencies today after China raised the yuan’s fixing by the most in seven sessions and a measure tracking the dollar against 10 major peers halted a six-day advance in New York, before rising 0.2 per cent today. The ringgit climbed 0.4 per cent, while Indonesia’s rupiah fell 0.4 per cent, as did Russia’s ruble. A Bloomberg gauge of 20 developing-nation exchange rates was little changed and has increased 3 per cent for the quarter.
Dollar bulls have turned cautious after last week pushing the currency to its longest run of daily gains in two months. The greenback may get a lead when Federal Reserve Chair Janet Yellen speaks Today at the Economic Club of New York. San Francisco Fed President John Williams damped enthusiasm for the currency yesterday, saying the economy is vulnerable to global financial and economic developments.
Stocks
The Malaysia FTSE Bursa Malaysia KLCI Index of shares was one of the biggest gainers today among Asian benchmarks, advancing 0.5 per cent to 1,710.95 as of 430pm in Kuala Lumpur. That’s the steepest increase since March 18. Foreign funds bought a net RM1.37 billioN of the country’s equities last week, taking purchases this month to 5 billion ringgit as of March 25, Zulkifli Hamzah, an analyst at MIDF Investment Bank, wrote in report yesterday.
The MSCI Emerging Markets stock index rose 0.1 per cent to 813.70, taking its gain since December 31 to 2.5 per cent. Seven of the 10 industry groups climbed, led by telecommunications providers. Healthcare companies dropped 1.1 per cent. The gauge is trading at 11.6 times the projected 12-month earnings, compared with 15.7 for the MSCI World Index. The latter has declined 2.1 per cent this quarter.
Taiwan property firm Ruentex Development Co. fell by the daily limit of 10 per cent after reporting 2015 net income that missed estimates and announced it doesn’t plan to pay a dividend on earnings for the first time in at least a decade. Chinese equities declined for a second day as technology companies slumped and property developers extended losses amid concern new price-cooling measures will hit sales. The Shanghai Composite Index slid 1.3 per cent.
Bonds
South Korea’s three-year government bond yield fell to the lowest level in four weeks on speculation new board members named by the central bank will favor cutting interest rates further from a record. The four new candidates announced by the Bank of Korea yesterday need to be approved by President Park Geun Hye and will replace policy makers whose terms on the seven-member board end on April 20.
The three-year yield dropped three basis points to 1.46 per cent, the lowest since February 29, Korea Exchange prices show. The yield on notes maturing in December 2025 also declined three basis points to 1.81 per cent. — Bloomberg
