London - Emerging equities were headed for their biggest monthly gain in more than three years in April thanks to a helping hand from Chinese shares, despite sliding for a second day on Thursday after disappointing US growth data.
The MSCI emerging market index has gained almost 8 percent since the start of April, getting a lift from a surge in Chinese stocks, though it was down 0.8 percent on the day. The MSCI Asia ex-Japan index slipped 1.1 percent.
Shanghai and Shenzhen-listed Chinese stocks were also weaker on the day but have risen 18 and 17 percent respectively on the month .
Investors' mood soured after first-quarter US growth data came in much weaker than expected, compounding worries over a slowdown in China and on top of persistent jitters over Europe as Greece battles to avoid bankruptcy.
The weaker US data, blamed on winter weather among other factors, also prompted the Federal Reserve to downgrade its view of the US labour market and economy. However, while this casts a shadow over global growth prospects it also suggests the Fed may have to wait a bit longer to raise interest rates, taking the pressure off some emerging economies.
“Emerging markets had partly priced in (a dovish) outcome from the Fed because in the run up to the Fed meeting we had so much disappointing data that the dollar weakened and many emerging markets had performed well,” said Murat Toprak, emerging markets strategist at HSBC.
Hungary's shares chalked up some of the biggest gains in April, adding more than 13 percent, while in Russia dollar-denominated stocks soared by more than 17 percent.
Yet on the day, Moscow dollar stocks were flat while rouble-denominated shares slipped by 0.3 percent. The rouble fell 0.9 percent against the dollar ahead of a central bank meeting, when policymakers are widely expected to cut the key interest rate by 100 basis points.
“Oil prices have stabilised (even increased); capital outflows have slowed; deposits are returning to banks; the rouble has strengthened by some 35 percent against the U.S. dollar; and the Ukraine crisis has cooled down,” SEB said in a note.
“The cut will signal that the (central bank) is turning its attention to growth.”
Currencies across emerging markets were mostly weaker on the day. In Turkey, the lira traded a touch weaker against the greenback as central bank governor Erdem Basci indicated monetary policy was tight enough for now, though he added he would take steps if necessary.
In eastern Europe, the Polish zloty eased 0.7 percent, while government bonds across the region also suffered.
Reuters