(Bloomberg) -- Emerging-market stocks rose to a two-month high, as expectations grew that China is gearing up to deliver more economic stimus, days after the Federal Reserve kicked off its interest-rate cutting cycle.
The MSCI benchmark for developing-nation stocks rose for the third straight day, after the People’s Bank of China cut the 14-day reverse repurchase rate by 10 basis points to 1.85%, fanning speculation that authorities will unveil further steps to revive growth. Central bank governor Pan Gongsheng is scheduled to hold a press conference tomorrow on financial support for economic development.
“PBOC cutting rates supports our view that Fed easing opens the door for further easing from China,” Jefferies analyst Mohit Kumar wrote, adding that he remains long Asian stocks.
MSCI’s index of emerging market currencies pulled back against the dollar which firmed against a basket of currencies after enduring three weeks of losses. Eastern European currencies lost ground against the euro as well, with the Hungarian forint and Czech koruna undermined by expectations of rate cuts this week.
Sri Lanka
In bonds markets, Sri Lanka’s dollar debt slid as leftist candidate Anura Kumara Dissanayake’s presidential election win cast doubt on the nation’s debt deals and its International Monetary Fund bailout.
Bonds maturing in March 2029 fell 3.1 cents, the biggest drop in about two years, to trade around 50.2 cents on the dollar on Monday.
“A Dissanayake win is the worst possible outcome for Sri Lanka’s bonds,” Tellimer strategists Hasnain Malik and Patrick Curran wrote in a note Sunday.
Elsewhere, TT International, a London-based investment firm owned by Sumitomo Mitsui Financial Group, hired a group of staff from BNP Paribas Asset Management for a six-person emerging-market debt team.
Jean-Charles Sambor, former head of EM debt at BNP Paribas Asset Management whose hiring by TT International was announced earlier this month, will lead the team from London.
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