London - Emerging markets struggled for
direction in thin pre-holiday trade on Wednesday, though a pause
in the dollar and higher oil prices helped Russia's rouble to
hit a one-week high.
MSCI's emerging market stock index eased 0.3
percent, with gains in Russia, Poland and some
Asian bourses but seeing losses in Asian
heavyweights Taiwan and South Korea.
Still reeling from the prospect of higher US interest
rates following last week's Federal Reserve meeting, South
Korea's won and the Thai baht hit multi-month lows
against the dollar.
The weakening came despite a South Korean official in charge
of foreign exchange markets cautioning traders about pushing the
currency too low.
But a rise in oil prices helped the rouble
strengthen 0.5 percent in its third day of gains, while South
Africa's rand gained 0.2 percent. The rouble has in
recent days overtaken the Brazilian real to become the best
performing emerging currency of 2016 against the dollar.
"Markets are waiting for year-end, investors are putting
small amounts on the table - no one wants to take on a lot of
risk here around the turn of the year," said Per Hammarlund,
chief emerging markets strategist at SEB, adding the overall
sentiment was generally positive.
Turkey's lira rose 0.4 percent in a second day of
gains despite data showing weakening consumer confidence
. With the central bank having failed to raise
interest rates on Tuesday, Hammarlund said the gains were
fragile.
"The lira is hanging by a thread. A renewed upward movement
in US Treasury yields, potentially as a result of Trump
pushing his infrastructure spending plans or at least a faster
rise in US inflation, would send the lira tumbling," he said.
Ukraine's dollar-denominated bonds rose to a 6-week high
after the parliament passed the 2017 budget overnight, raising
its chance of securing the next tranche of the International
Monetary Fund (IMF) under a $17.5 billion loan package.
"Although it is too late for a Xmas IMF loan tranche
release, this plus the nationalisation of PrivatBank should help
secure the $1.3 billion in January," Simon Quijano-Evans, a
strategist at Legal & General Investment Management, told
clients.
In emerging Europe, Poland's zloty fell 0.3
percent, underperforming its regional peers as senior
politicians urged the opposition to abandon their protests and
warned it could impact investment.
Polish markets have been under pressure in recent days, and
opposition lawmakers vowed on Tuesday to continue their sit-in
protest in parliament until a vote on the 2017 budget they say
was held illegally outside of the parliament's plenary hall on
Friday is re-run with all lawmakers.
And in its latest survey, the Institute for International
Finance (IIF), said non-resident investors have pulled a total
of $23 billion from emerging market portfolios since early
October, including $18 billion since the U.S. presidential
election.
The IIF, one of the most authoritative trackers of capital
flows to and from the developing world, said the US presidential election had triggered a substantial reversal in
fund flows, with nearly two thirds of withdrawals since Trump's
victory coming from debt securities.