(Bloomberg) -- Developing-nation stocks bounced back from their longest losing streak since August, as investors focused on a raft of central bank interest-rate decisions in the emerging world.
The MSCI index for emerging-market stocks closed 0.1% higher on Tuesday, fueled by a rebound in Asian technology stocks such as Taiwan Semiconductor Manufacturing Co. Ltd. and Samsung Electronics Co.
The key gauge for EMFX was little changed, with most Latin American currencies weaker against the greenback amid renewed dollar strength. The Japanese yen — one of the main funding currencies for carry trades involving Latin American FX — also rallied, further adding pressure on the region. The Mexican peso was among the main decliners of the day, falling as much as 1.4% against the dollar.
“Uncertainty remains high, Latam FX performance weak, and volatility has failed to recede, decreasing the appeal of carry trades in the region,” JPMorgan Chase & Co. strategists including Tania Escobedo Jacob wrote in a note. Latin American markets are at a “crossroads between the imminent start of the Fed easing cycle and risks around upcoming US elections,” the note read.
Rate Decisions
Investors digested several central bank decisions in developing economies. Turkey’s central bank extended its interest-rate pause into a fourth month and vowed to maintain a tight stance until it sees a lasting slowdown in monthly price increases.
Hungary’s central bank, meanwhile, continued its easing cycle after inflation came in lower than expected last month. The forint traded weaker against the euro after the decision, just off a six-week high.
“We continue to expect that inflation dynamics in the next few months will support further easing in the near-term,” Twisha Roy, an economist at Deutsche Bank, wrote in a note on Hungary. “However, each meeting will definitely be a choice between a 25 basis-point rate cut and a pause. Both inflation data as well as forint dynamics will be key.”
In Nigeria, the monetary authority raised its key interest rate by 50 basis points to 26.75%, less than the median estimate of six economists in a Bloomberg survey, which was for an increase to 27%.
For Nigeria and Turkey, “significant monetary tightening has ensured record-high market rates, which has put these markets in the spotlight, but portfolio flow dynamics are different,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc in London. “Nigeria will need larger portfolio and capital inflows for the naira to stabilize and recover.”
Elsewhere, a Czech policymaker didn’t rule out a final half-a-percentage cut next week, even though the central bank is likely to scale back the pace of easing soon.
--With assistance from Vinícius Andrade.
©2024 Bloomberg L.P.
