Stocks hit one-week high on China boost; US election eyed

Reuters

Stocks hit one-week high on China boost; US election eyed

2024 11월 5 일, 오전 10:03 GMT

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Updated at 0943 GMT

Saudi Aramco dips after reporting Q3 profit drop

Polish c.bank kicks off monetary policy meet

Mexican peso options volatility highest since November 2016 US election

MSCI EM stocks index up 0.8%, FX flat

By Johann M Cherian

Nov 5 (Reuters) -An emerging markets stocks index got a lift on Tuesday, aided by China stocks, although broader sentiment was one of caution with most currencies flat as investors were on edge for the outcome of a highly uncertain U.S. election before making big bets.

MSCI's gauge for EM equities .MSCIEF added 0.8% to touch a one-week high, with China stocks .CSI300, .SSEC hitting a four-week high after services activity expanded at the fastest pace in three months in October.

Chinese Premier Li Qiang expressed confidence in the country meeting this year's growth target of around 5%, further lifting the mood.

A currencies gauge .MIEM00000CUS hovered near the flat mark with currencies of China CNH=, India INR=IN, Turkey TRYTOM=D3 muted, although volatility is expected to spike as the U.S. election results roll in.

The presidential race is closely tied between Republican ex-president Donald Trump and Democratic Vice President Kamala Harris. Investors have been putting on trades betting on a second term for the former president, although he is still neck-and-neck with the vice president in several polls.

Among emerging markets, analysts say Chinese and Mexican assets are the most exposed to a Trump victory, given Trump's threat to impose tariffs on both countries. Other proposed Trump policies are seen by analysts as inflationary and could lift the dollar and U.S. Treasury yields and consequently hurt foreign investment into some developing markets.

"With the elections approaching, people have been very shy with regard to taking emerging markets risk in general so from an allocation point of view, investors probably will take a wait-and-see approach before making a call either way," said Zin Bekkali, founder of Silk Invest.

Bekkali said that economies of Vietnam, Philippines, countries in the Middle East, Kenya and Morocco were among those expected to do well under either U.S. administration.

On the day, overnight volatility on the Mexican peso MXN=, MXNONO= soared above 87%, its highest since the day of the 2016 vote on Nov. 8.

In central and eastern Europe, Hungary's forint EURHUF= hovered near a 22-month low, while Poland's zloty EURPLN= was flat as the local central bank kicked off a two-day monetary policy meet.

Analysts expect the two currencies to be the ones most sensitive to election results given the economies' reliance on export demand for their products. Regional central banks could also speed up their policy easing cycles to stimulate their economies.

Meanwhile, Turkish stocks .XU100 pared some losses after touching a nine-month low as markets priced in higher interest rates for longer a day after data pointed to sticky inflation.

Saudi Arabia's benchmark index .TASI dropped 0.6%, with oil behemoth Saudi Aramco 2222.SE off 0.2% after reporting a 15.4% drop in third-quarter profit due to lower crude prices and weaker refining margins.

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 Alex Richardson

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