LONDON, Sept 20 — Russia’s bank and financial shares index fell today after a lender asked authorities for a bailout, while other emerging assets flatlined, awaiting the outcome of the US Federal Reserve meeting.
Emerging stocks traded just off three-year highs and sovereign bond yields have also pulled off multi-year lows, with the Fed expected to announce a decision to start paring bond holdings and provide hints of a possible December rate hike.
“The pain move in emerging markets has already been experienced over the past two weeks as we’ve seen a steep rise in the core rates market both in Europe and the US,” Societe Generale analyst Phoenix Kalen said, predicting a “day of consolidation”.
“Looking ahead the overall backdrop is still very benign with the gradual pace of normalisation and the well-flagged signals from the (European Central Bank) and Fed,” she added.
The Fed meeting overshadowed fresh threats from US President Donald Trump against North Korea, with a flat dollar even allowing the Korean won to strengthen 0.3 per cent.
Investors are awaiting more news from Russia where the central bank was considering a request to bail out B&N, the country’s 12th largest bank by assets, just three weeks after Otkritie bank was rescued.
While Russia’s main equity index was flat, bank shares slipped 0.3 per cent to a two-week low. But the losses were offset by a 2 per cent rise in Aeroflot which completed a sale of close to 5 per cent of its shares.
The rouble eased 0.11 per cent, staying off three-week lows hit yesterday amid general emerging market weakness.
“The reality is that there are a few institutions where the funding structure has been very weak – it’s the same situation we saw with Otkritie. They couldn’t hold the balls in the air over time,” said a trader at a Russian brokerage.
“The central bank could have acted earlier but now that they’re acting, they’re acting extremely well. There is no panic selling, no move on the rouble, no problems in interbank lending.”
South African data showed annual inflation quickening slightly in August to 4.8 per cent. The rand firmed 0.2 per cent but the data is unlikely to dissuade the central bank from cutting rates on Thursday.
“We’re expecting the (central bank) to continue with another 25 basis points cut as inflation has come down quite a bit. Also, it’s quite lacklustre and disappointing news coming out of macro side so the economic data warrants more monetary easing.” SocGen’s Kalen said.
The Hungarian forint was flat after the central bank undertook expected policy easing measures on Tuesday, though its bond yields fell after the decision, taking average yields to a new record low around 1.53 per cent on JPMorgan’s GBI-EM index. Hungary was the top performer on the index on Tuesday, JPM said.
The Mexican peso was flat after touching two-week lows against the dollar following news of damage and fires caused by a deadly earthquake. — Reuters