Emerging market stocks rallied on Thursday with the dollar taking a hit on growing bets of an imminent end to the US rate-hiking cycle, while Pakistan dollar bonds jumped after the International Monetary Fund cleared a $3 billion bailout.
The MSCI index for EM stocks gained 1.4 percent, touching a three-week high, led by heavily-weighted China’s blue-chip stocks.
China’s Hong Kong-listed tech giants advanced 3.8 percent after Premier Li Qiang urged the companies to support a slowing economy, adding to signs that a years-long crackdown on the sector is over.
The MSCI index for EM currencies rose 0.5 percent, touching a near three-month high, set for its steepest five-day percentage gain since mid January.
The dollar came under further pressure as traders took surprisingly slow US inflation as a signal rate rises will be all but finished by month’s end.
“With uncertainty in US and other developed markets over inflation outlook and central bankers’ desire to re-establish anti-inflation credibility, safer options remain those EM currencies backed by positive real interest rates, like in Brazil and Mexico,” said Hasnain Malik, emerging & frontier markets equity strategy at Tellimer.
Pakistan’s sovereign bonds and rupee gained after the IMF cleared a $3 billion bailout program, which will immediately disburse about $1.2 billion to help stabilize the ailing economy.
This follows a $2 billion financial support from Saudi Arabia this week.
“Pakistan’s IMF deal and follow-on release of bilateral funds from Saudi and others allows it to step back from a full blown crisis,” Malik added.
The South African rand jumped 0.8 percent, slipping below 18 per dollar for the first time since mid April, ahead of local mining output data.
The Russian rouble edged higher, still smarting from the impact of domestic political turmoil and capital outflows following last month’s abortive mutiny.
Meanwhile, data showed Czech Republic’s headline inflation eased below 10 percent in June for the first time since 2022 start. Another set showed Romania’s consumer price rose 10.25 percent year-on-year in June from May’s 10.64 percent, in line with expectations.
These inflation prints come in the backdrop of growing talks of rate cuts in Central and Eastern Europe. However, both the Romanian leu and Czech crown were flat against the euro.
Elsewhere, Thailand markets floundered as political instability weighed on sentiment, with Prime ministerial hopeful Pita Limjaroenrat bracing for a critical test of his political clout.South Korea’s central bank held rates steady for the fourth time, saying it will maintain a tight stance on monetary policy amid still-high prices. The won was up 0.4 percent.
