Emerging stocks, currencies surge as investors see optimism in trade

Emerging market stocks rose on Friday, licking their wounds after the previous day's losses while developing world currencies firmed the most in two weeks against a softer dollar. Investors tip-toed back into the developing world, upping exposure to risky assets which were walloped on Thursday as capital made a dash for the exits on rising U.S.-China trade fears. "Investors are largely neutral on EM, this is because most investors seem to have a fear-of-missing-out (FOMO) mentality," Min Dai, Morgan Stanley's head of Asia Rates and FX Strategy, wrote in a note.

"The risks to a neutral view are that investors could be dragged in either direction if the market moves, exacerbating the volatility." MSCI's index of developing world stocks rose 0.3%, with Chinese blue-chip shares matching that gain. MSCI's emerging market currencies index added 0.2%.

Turkey's lira ticked 0.1% firmer, while stocks rose 1%, trimming their degree of underperformance relative to the MSCI developing world equities benchmark. Higher oil prices underpinned a 0.4% firming in Russia's rouble as it lifted off Thursday's eight-day closing low while rising energy stocks pushed the Russian index 0.6% higher.

Brent crude futures rose 0.9%, making back a fraction of Thursday's 4.6% slide, which was their worst loss in about five months. South Africa's rand was 0.6% stronger. The country's central bank kept lending rates unchanged at 6.75% on Thursday in a decision that divided policymakers.

While inflation and inflation expectations were close to the middle of the central bank's 3% to 6% target range, they had not yet settled there. South African stocks added 0.4%, although Old Mutual Ltd fell about 1%.

The country's No.2 insurer said its chief executive had been suspended following a "material breakdown in trust" between him and the board. Stocks in Warsaw traded 0.8% higher. PKN Orlen rose 1.2% after Morgan Stanley boosted its rating on Poland's biggest oil refiner to "overweight" from "equal-weight". The broker said the disruption of crude exports from Russia appears to be short-lived and Poland may start receiving clean crude on June 9.