Emerging equities rose on Monday, lifted by a 3 per cent surge in China following an interest rate cut, though emerging currencies slipped, led by the Polish zloty after a week-end election surprise.
The MSCI EM stock index added 0.3 per cent, while Chinese stocks edged further off last week’s three-week lows thanks to property and infrastructure shares following the third rate cut in six months on Sunday.
Greek shares were the standout exception, losing 3.2 per cent with bank stocks down more than double that as investor jitters grew ahead of another euro zone meeting over a cash-for-reforms deal for Athens, which also needs to pay a €750 million debt instalment to the International Monetary Fund on Tuesday.
Emerging stocks have suffered two straight weeks of losses, rattled by a broad sell-off across global bond markets.
“There was a bit of help from the rate cut in China...(but) we are broadly in ranges here, and concern is still split around the bond sell-off, Greece, etc.,’’ said Peter Attard Montalto, emerging market economist at Nomura.
“I don’t think there is anything to help us break out to new levels.’’
Currencies across emerging markets felt the pressure of a stronger dollar, while in Poland the zloty and local bonds were hurt by a surprise election setback for the ruling PO party on Sunday.
The zloty fell 0.7 per cent versus the euro when incumbent Bronislaw Komorowski, backed by the ruling PO party, unexpectedly came second behind Andrzej Duda of the opposition PiS party in a first-round presidential vote. Local bonds slipped across the curve.
The result has sparked investors’ concerns that the European Union’s biggest emerging economy might be heading towards a less business-friendly environment, with Duda campaigning on pledges to lower the retirement age and to keep Poland out of the euro.
“If PiS holds only the presidency but not parliament, it will delay PO’s reform agenda and bring a 5-year period of policy limbo, but there would be no large-scale policy overhaul. But markets will now fret about the possibility that PiS will win both presidency and parliament,’’ Commerzbank analysts said.
Against the stronger dollar, South Africa’s rand weakened some 0.5 per cent, while the Turkish lira, the Indian rupee and the Israeli shekel all slipped around 0.3 per cent.
Currencies across central and eastern Europe also weakened against the euro, with the forint down 0.6 per cent.