(Bloomberg) -- Emerging market stocks and currencies rose on Friday ahead of a key briefing from China’s finance minister, expected to unveil fresh stimulus measures to revive the slowing economy.
MSCI’s emerging markets stock index advanced for a second day, led by gains in Taiwan Semiconductor, MediaTek, and Samsung Electronics. Despite this, the gauge is set for a 1.7% weekly decline, its biggest since early September, ending a four-week rally.
An index for emerging market currencies also firmed for the first day in nine, with the dollar stabilizing. Thailand’s baht, South Korea’s won and the Indonesian rupiah were the biggest beneficiaries on the day.
Analysts predict Beijing could announce as much as 2 trillion yuan ($283 billion) in new fiscal support on Saturday, to bolster growth and restore confidence.
Goldman Sachs said the recent rally in EM equities had been fueled by a 40% surge in Chinese stocks from their lows, with China’s outperformance relative to the rest of EM at its widest point in 25 years.
“We expect further upside in EM equities,” Goldman’s strategists, including Kamakshya Trivedi, wrote in a note to clients. “The trifecta of non-recessionary Fed cuts, easing by other EM central banks, hopes of a stimulus-led growth revival in the dominant China market, and a backdrop of strong, mid-teens corporate earnings growth at fair valuations keeps us constructive on the EM equity complex.”
The bank said that while geopolitical risks such as US elections and Middle East tensions could introduce volatility, it remains optimistic, forecasting the MSCI EM index to reach 1,300 over the next 12 months.
Elsewhere in EM, Romania’s inflation eased to the lowest level in three years, giving the nation’s central bank more bandwidth to resume a recently-paused monetary easing.
In South Africa, a multibillion-dollar plan to expand the nation’s electricity transmission network may throw a lifeline to the country’s corporate bond market as it struggles to recover from a post-pandemic slump.
The Indian rupee fell to a record low, dropping past 84 to a dollar for the first time as foreigners sold the country’s stocks and bonds.
The currency dropped 0.1% to a new record low of 84.0975 on Friday. Offshore investors have sold $5.7 billion from stocks in the month so far, while bonds have seen $125 million of outflows, according to data compiled by Bloomberg.
©2024 Bloomberg L.P.