London - Emerging equities broke a nine-day losing streak on Wednesday, lifted by hopes of a cash injection from China's central bank and speculation the U.S. Federal Reserve will maintain its pledge that interest rates will stay low.
Russian shares, however, tumbled after the arrest of the head of the Sistema conglomerate.
Media reports that China would pump 500 billion yuan ($81.35 billion) into its top five banks helped most Asian currencies to gain ground and lifted emerging market equities.
As markets awaited a statement from the U.S. Federal Reserve on Wednesday after its policy meeting, Latin American financial markets jumped late on Tuesday on a Wall Street Journal report saying the Fed will maintain a pledge to keep interest rates low. Most emerging Asian currencies also got a boost, while Hong Kong's benchmark index closed higher for the first time in nine sessions.
Worries about an earlier-than-expected rate hike by the Fed and weak Chinese data had recently placed emerging assets under strain, pushing shares away from three-year highs.
“EM has been on a downward trend for almost two weeks now ... what is happening today is a bit of stabilization,” said Ilan Solot, strategist at Brown Brothers Harriman. “Everybody is taking a pause for breath and taking a reassessment.”
MSCI's main emerging equity index rose 0.8 percent , rising off one-month lows, boosted also by a half percent rise in Chinese markets .
RUSSIAN SHARES TUMBLE
Russian shares, however, tumbled more than 2 percent after Sistema boss, Vladimir Yevtushenkov, was placed under house arrest and accused of money-laundering in connection with his company's acquisition of oil producer Bashneft.
Investors sent Sistema shares into freefall, loosing more than a third, while Bashneft chalked up losses of around 15 percent while Sistema-controlled mobile phone operator MTS dropped 10 percent.
Trade in Sistema and Bashneft shares was temporarily restricted by the Moscow exchange. Sistema has denied the allegations.
The latest moves extend Russian equity losses to more than 15 percent this year, among the worst emerging market performers.
“All this comes at a particularly inopportune time for Russian markets, given concern over developments in Ukraine, the imposition of Western sanctions, and also the weak underlying growth story in Russia,” said Tim Ash, head of non-Africa EM research at Standard Bank in a note.
The rouble was flat to the dollar, staying off record lows after Russia's central bank late on Tuesday started overnight rouble-dollar swap operations to increase short-term banking sector liquidity. Investors have also scaled back bets against the rouble as it approaches the level at which the central bank intervenes to support it.
SA INFLATION UP
Elsewhere, South African inflation edged up to a higher-than-expected 6.4 percent in August year-on-year, data showed. This will add pressure on the central bank to hike rates as soon as November, though a recent Reuters poll predicted an on-hold decision this Thursday.
Standard Chartered Bank's chief Africa economist Razia Khan said inflation was uncomfortably high, but the bank had already addressed this through earlier rate rises.
“In terms of the detail of the CPI print, there isn't too much that concerns us. Nor is there sufficient evidence to change our view that the (central bank) will most likely keep interest rates on hold tomorrow,” Khan told clients.
South Africa was set however for a bond milestone with its first sukuk Islamic issue, having tightened yield guidance to under 4 percent. Investors have submitted bids of more than $1.5 billion, Thomson Reuters service IFR reported
Turkey meanwhile sold a 100 billion yen ($932 million) Samurai bond, completing its 2014 external borrowing programme.
Turkish shares rose 0.4 percent but shares of troubled Bank Asya extended recent losses, falling 10 percent. The stock has plummeted 42 percent since it resumed trading on Monday following a suspension of trade on Aug. 7.
The Israeli shekel fell 0.3 percent to trade at one-year lows versus the dollar after data showed economic growth had slowed to five-year lows.
Reuters