Emerging-market stocks and currencies rebounded on further evidence the Federal Reserve will refrain from tightening policy anytime soon as Britain’s vote to leave the European Union clouds the outlook for global growth.
A gauge of developing-nation equities ended a two-day decline as benchmarks in Poland, Russia and Hungary rallied more than 1 percent and energy companies advanced with oil. South Korea’s won led an advance in currencies for the first time this week and Polish bonds retreated as policy makers kept interest rates on hold for a 16th month. Minutes of the Fed’s June 14-15 meeting released Wednesday showed policy makers were losing confidence in the U.S. economy’s ability to withstand an interest-rate hike as they awaited Britain’s referendum a week later.
Developing-nation assets witnessed wide swings in the aftermath of the June 23 U.K. vote as investors assessed its impact on the world economy and speculated that major central banks will add stimulus. Concerns about China’s growth outlook eased on Thursday as data showed an unexpected increase in the country’s foreign-exchange reserves last month. Franklin Templeton bond fund manager Michael Hasenstab said emerging assets are being “mispriced” by markets and are in a strong position to weather global shocks.
“The Fed minutes confirm the market impression that it will be a long time until they will be ready to do anything on rates,” said Anders Svendsen, an analyst at Nordea Bank A/S in Copenhagen. “The Chinese data is definitely positive. The People’s Bank of China will probably take it as a sign that they can continue to allow the yuan to weaken gradually.”
The MSCI Emerging Markets Index rose 1 percent to 827.48 as of 1:46 p.m. in London, extending a rally this year to 4.2 percent. The MSCI Emerging Markets Currency Index advanced 0.4 percent, its first increase in four days.
All 10 industry groups in the MSCI emerging-markets stock index advanced, as a gauge of energy companies jumped 1.3 percent, the most since June 29, as oil climbed for a second day. MOL Hungarian Oil and Gas Plc surged to a four-year high in Budapest.
Energy producers led the Hang Seng China Enterprises Index of mainland companies trading in Hong Kong higher. The gauge halted a two-day slide to jump 1.2 percent. The Shanghai Composite Index was little changed, after a four-day gain that sent it to an 11-week high on Wednesday.
Samsung Electronics Co. reported its biggest operating profit in more than two years. The world’s largest maker of phones and memory chips climbed 2 percent and was the biggest contributor to MSCI’s measure of developing-nation shares.
Markets in Malaysia, Indonesia, Pakistan and the Middle East remained shut. Ibovespa futures rose in Brazil as crude’s gain improved the outlook for state-controlled oil producer Petroleo Brasileiro SA.
The won advanced 1 percent against the dollar. The South African rand and Turkish lira climbed at least 0.3 percent.
Russia’s ruble gained 0.4 percent, advancing for a second day, as Union Bancaire Privee said investors are shifting into emerging-market currencies outside Europe in the aftermath of Britain’s vote.
Polish bonds fell, with the yield on five-year notes climbing nine basis points to 2.29 percent. New central bank Governor Adam Glapinski kept borrowing costs unchanged as he stressed the importance of maintaining financial stability in the wake of the Brexit concern.
Most other developing-nation bonds climbed, with yields on South African 10-year notes dropping six basis points to 8.74 percent and yields on similar-maturity Russian debt retreating for the first day this week.
Fitch Ratings warned in a report that emerging-markets face further downgrades this year because public and external finances in many commodity-exporting countries are not yet aligned to lower oil prices. The ratings provider downgraded 15 borrowers globally in the first half of the year, mostly in developing countries.
The premium investors demand to own emerging-market bonds rather than U.S. Treasuries narrowed two basis points to 381, according to JPMorgan Chase & Co. indexes.