EM shares rise for fourth week, but caution remains

Jan 20 (Reuters) – Emerging market stocks rallied on Friday and could end their fourth week in a row as optimism over China’s lifting of some anti-COVID measures and hopes for a smaller Fed rate hike eased recession fears.

The MSCI stock index rose by 0.7% by 12:21 Moscow time.

China’s stocks closed higher on Friday ahead of the Lunar New Year celebrations as strong foreign capital inflows added to optimism after authorities assured the worst of the battle against COVID-19 was over.

The index of Asian stock exchanges, excluding Japan, rose by 0.9% by 12:21 Moscow time.

The Turkish stock index gained 1.5%, while the South African stock index gained 0.4%.

“The opening of the Chinese economy is certainly a big story that will determine the development of emerging market assets this year, but we believe that its impact will be more muted than previous surges in the Chinese economy,” Citigroup strategists warned.

“While China’s consumer-driven economic recovery has some positive implications for the EM, it will not be as good as an investment-driven economic recovery. It is also worth considering the negative impact of outbound tourism on China’s balance of payments, which creates opportunities for even more capital outflows and increases the volatility of the yuan.”

Emerging Market Currencies MSCI traded largely flat.

Turkish lira by 12:21 Moscow time fell by 0.2% to 18.80 per dollar. On the eve of the Turkish Central Bank did not change the key rate, keeping it at 9%, as analysts expected.

The South African rand slipped 0.3% to 17.33 per dollar and was on track for its biggest weekly drop in five months as worries about power outages affecting economic activity in Africa’s most industrialized country continue unabated.

Inflows into EM hard-currency bond funds increased to $1.9 billion, the highest since June 2021, according to JPMorgan data.

Overall, inflows into emerging market bonds and stocks have totaled $3.8 billion and $12.9 billion since the start of the year, JPMorgan said.

The original message in English is available at the code: (Susan Matthew in Bangalore)

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