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Emerging markets stocks steady; Lira, Rand slips

"Its wait and see," said Trieu Pham, an emerging market credit researcher at ING. "If the consensus view holds then we would see a somewhat softer dollar which should be good for emerging currencies."


Devdiscourse News Desk washington Last Updated at 06-11-2018 15:34:35 IST
Emerging markets stocks steady; Lira, Rand slips
  • The MSCI's benchmark emerging equity was little changed, despite China stocks falling for the second day in a row amid concerns over the possible impact of a new technology board to list shares in Shanghai. (Image Credit: Twitter)

Emerging markets stocks and currencies held steady on Tuesday, with investors cautious ahead of the U.S. midterm elections, though the lira and the rand both fell for the first time in four sessions.

Investors are bracing for a split Congress, with Democrats taking control of the House of Representatives and Republicans holding their advantage in the Senate, but are mindful that President Donald Trump's victory in 2016 surprised experts.

A split Congress would likely reduce trade tensions, while the dollar could come under pressure as it is unlikely any new fiscal stimulus could be launched to counterbalance forecasts of slowing U.S. economic growth next year.

"Its wait and see," said Trieu Pham, an emerging market credit researcher at ING. "If the consensus view holds then we would see a somewhat softer dollar which should be good for emerging currencies."

Jason Tuvey, a senior emerging-market economist at Capital Economics, said moves in the stock market would depend on Trump's stance on trade.

"If he secures a big victory then he might push ahead and take a more protectionist stance," he said.

The MSCI's benchmark emerging equity was little changed, despite China stocks falling for the second day in a row amid concerns over the possible impact of a new technology board to list shares in Shanghai.

Hong Kong's Hang Seng meanwhile firmed to close up by 0.58 per cent, with other Asian markets also firming.

Emerging market currencies did not benefit much from the greenback treading water ahead of the U.S. elections, as gains in the yuan on optimism over Sino-U.S. trade talks was offset by a drop in the lira and the rand.

While the South African rand softened 0.4 per cent amid subdued risk appetite, the Turkish lira dipped 0.5 per cent, despite investor optimism over a U.S. waiver on sanctions targeting Iranian oil imports.

"Maybe there is a little bit of profit taking here ahead of elections," Pham said of the lira, which has gained more than 7 per cent in the last 10 sessions.

"The general sentiment is that the ties between the two countries (U.S. and Turkey) are improving, so this is lending support. There still may be a little bit of room left."

The Johannesburg stock index snapped a four-day winning streak, but Russia stocks hit their highest in almost three weeks as data showed service sector activity hit an 11-month high in October.

Eastern European currencies were little changed.

(With inputs from agencies.)


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