London - Emerging equities hovered at one-week highs on Thursday, benefiting from last-ditch efforts to resolve the U.S. budget crisis, fresh signs of economic recovery in China and deepening weakness in the Japanese yen.
MSCI's emerging equity index rose 0.3 percent , bringing year-to-date gains to almost 15 percent, outstripping the 13 percent rise on world stocks.
In EMEA emerging markets, Turkish stocks hit a fresh record high while Johannesburg gained a quarter percent to hover just off record peaks hit recently. Russian and Polish stocks were at four- and three-month highs respectively.
Analysts said markets have already priced in a deal to avert automatic U.S. tax rises and spending cuts after President Barack Obama cut short a holiday to revive talks with the Republicans.
Sentiment - and Asian markets - were also buoyed by data showing a 22.8 percent rise in Chinese industrial profits in November, a second month of double-digit growth.
In Japan, the yen hit two-year lows on anticipation of aggressive stimulus from the new government, a policy that is likely to benefit emerging market assets by keeping liquidity ample and investors eager to spend it on higher-yielding assets.
“It's all very thin on a day like this but what's happening in Japan is very positive for emerging markets,” said Lars Christensen, chief emerging markets analyst at Danske Bank. “Yen weakness equates to EM strength.”
While emerging currencies generally firmed, the Hungarian forint hovered near 6-1/2 month lows. Despite a recent outlook upgrade from Fitch, the forint lost 2 percent last week as investors interpreted Budapest's plans to sell global bonds as more evidence that talks with international lenders had stalled. -Reuters