Stocks, FX muted after volatile week; China policy in focus

Reuters

Stocks, FX muted after volatile week; China policy in focus

Nov 8, 2024 at 10:14 am GMT

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Updated at 0937 GMT

Turkey's c.bank vows tight policy on inflation; stocks surge

Romania interest rate decision due later in the day

Polish c.bank publishes inflation forecasts

MSCI EM stocks index flat, FX up 0.1%

By Johann M Cherian

Nov 8 (Reuters) -Most emerging market currencies and stocks were flat on Friday, a tepid end to a turbulent week following U.S. president-elect Donald Trump's win, while investors were left unimpressed after policy announcements by China's top legislative body.

MSCI's index tracking bourses in developing markets .MSCIEF gave up early gains and was flat, while currencies .MIEM00000CUS inched up 0.1%.

Meanwhile, China's yuan CNH= dipped 0.3% after the country's National People's Congress kicked off a fresh round of fiscal support that eases debt repayment strains for local governments.

Domestic equities .CSI300, .SSEC closed marginally lower and U.S.-listed shares of Chinese companies such as Alibaba BABA.N, Li Auto LI.O and NetEase NTES.O dropped between 3% and 4%.

"That is not what the market was looking for. Given that Trump has become the President there are concerns that he would increase tariffs on Chinese exports to the U.S which would mean that China would need domestic (consumption) stimulus even more," said Ruchir Desai, fund manager at Asia Frontier Capital.

The MSCI EM stocks index was set for its biggest weekly jump in six weeks, aided largely by Chinese stocks in anticipation that Trump's victory could see a bigger stimulus package out of the top consumer.

Equities in other developing markets also saw advances on expectations that increased surcharges on China exports to the U.S. could see companies shifting operations to other economies, while faster central bank interest rate cuts could also act as economy tailwinds.

Some Asian and African economies that have less trade exposure to the U.S. are also expected to be more insulated to trade tensions.

The MSCI EM currencies index however, was set for marginal weekly declines, as investors awaited further clues on Trump's cabinet picks and if he would follow through with his campaign promises on trade, immigration and security.

Meanwhile, Turkish equities .XU100 surged nearly 2%, with banks .XBANK up 4%. The local central bank said it will maintain its tight policy to ensure disinflation remains on track, after lifting the country's inflation forecast for this year and the next.

In eastern and central Europe, an equities index .MIEM00000PUS was poised for its steepest weekly increase in nearly three months.

Among currencies, Poland's zloty EURPLN= dipped 0.1%. The local central bank said, if the government removes a cap on household energy prices in 2025, inflation is expected to peak in the first quarter and return to the target range in early 2026.

Romania's leu EURRON= was flat ahead of an interest rate decision expected later in the day.

Currencies of countries in geopolitical conflict such as Israel's shekel ILS= and Ukraine's hryvnia UAH= inched up 0.1% and 0.2%, respectively.

Desai anticipates a quicker resolution to those conflicts under a Trump presidency could soften oil prices, ease supply chains and boost the global economy overall.

For GRAPHIC on emerging market FX performance in 2024 http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2024 https://tmsnrt.rs/2OusNdX

Reporting by Johann M Cherian in Bengaluru, Editing by William Maclean

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