INTERNATIONAL - Emerging market stocks ticked higher on Friday on expectations of further monetary stimulus to mitigate the impact of the coronavirus epidemic on the global economy, while regional currencies largely shrugged off a raft of weak economic data.
A basket of emerging market equities was up 0.1%, after declining in the previous session as China reported a spike in the number of new coronavirus cases, due mainly to a change in the diagnosis method.
On Friday, the outbreak had still shown no signs of peaking, with health authorities reporting more than 5,000 new cases. The death toll from the epidemic now sits at 1,380.
Still, the MSCI index was set for its second straight weekly gain as liquidity measures, including a cut in interest rates, by the Chinese central bank took hold.
The bank said it was ready to inject more cash into the system to boost business confidence and consumer spending, as early projections indicated growth in the world’s second-biggest economy would slow sharply in the current quarter.
“The main catalyst remains the promise of global stimulus, but if China’s weakness extends to the second quarter, risk appetite will have trouble driving assets higher,” said Edward Moya, senior market analyst at OANDA.
Currencies in the developing world were eyeing their first weekly increase in four, with broad-based gains on Friday powered by hopes of central bank intervention to kick-start economic growth.
Hungary’s forint rebounded from record lows, shrugging off a cut in the country’s 2020 GDP growth forecast, after the central bank pledged to deploy its full monetary arsenal to rein in inflation.
The Czech crown hit a seven-and-a-half year high of 24.765 against the euro, even as data showed economic growth in the fourth quarter was slower than expected.
The South African rand firmed 0.7% versus the dollar after President Cyril Ramaphosa set out brief plans to stimulate economic growth during his State of the Nation address, although his speech was short on specifics and time frames.
“The rand is a little bit stronger today, but it is not an outburst of enthusiasm among investors,” said Piotr Matys, Emerging Markets FX Strategist at Rabobank. “They have heard it all before, they now expect concrete actions.”
The currency, one of the highest yielding in the developing world, has widely lagged regional peers this year as the country grapples with the worst power outages in a decade.
Russia’s commodity-linked rouble was up about 0.4%, tracking oil prices.
Turkey’s lira, however, shed 0.2% and was on course for its fifth straight weekly decline, as data showed the country’s current account deficit in December widened to $2.798 billion.