(Bloomberg) -- Stock markets in developing nations rose to the highest level in two and a half years as China’s economic stimulus and dovish signals from US Federal Reserve officials fueled positive investor sentiment.
The MSCI equity index for emerging economies advanced 1.5%, extending its gains to a fourth day. The rally was driven by Hong Kong listed blue-chips including Tencent Holdings Ltd. and Alibaba Group Holding Ltd. Chipmaker Taiwan Semiconductor Manufacturing Company Ltd. also rose as Morgan Stanley raised its price target for the shares.
Appetite for riskier assets improved on Tuesday after China announced an array of measures to address concerns over slowing growth, including steps to ease monetary conditions and provide liquidity support for stocks.
The action taken by the People’s Bank of China “can further boost financial market risk sentiment in the near-term,” said Elias Haddad, senior markets strategist at Brown Brothers Harriman.
“Nevertheless, to escape the debt-deflation loop, Chinese policymakers need to scale-up fiscal measures to boost consumption growth,” Haddad said in a note.
Emerging-market currencies mostly rebounded against the dollar in European trading hours after comments from several Fed officials left the door open to additional large interest-rate cuts. The Malaysian ringgit jumped 1.2% versus the greenback, while the Thai baht and Polish zloty were up 0.4% as of 10:30 a.m. in London.
The Hungarian forint, which has been under pressure from a combination of fiscal and monetary risks, was steady against the euro before a meeting where the central bank in Budapest is expected to lower the benchmark interest rate by a quarter percentage-point to 6.5%.
“Even before the Fed’s latest decision, we were leaning toward a 25 basis-point cut at the National Bank of Hungary’s September meeting,” said ING Bank NV strategist Frantisek Taborsky. “Post-Fed, we see a non-negligible chance of a slight dovish shift in forward guidance, with the 6-6.25% range cited as a realistic target for the 2024 terminal rate.”
In credit markets, Sri Lanka’s dollar bonds held mostly steady after the International Monetary Fund said it would work with the newly elected leftist president, including on the latest review of the country’s $3 billion bailout package.
Turkey has mandated banks for the issuance of a 10-year dollar-denominated bond, which will be switched for existing shorter-term notes to ease immediate repayment pressures.
©2024 Bloomberg L.P.
