China economy news lifts emerging markets stocks

Emerging stocks are poised for their best week in six after China released a report showing the economy stabilized in the first quarter.

The MSCI Emerging Markets Index was little changed Friday after climbing 3.5% this week, the biggest weekly rise since March 4. Eight out of 10 industry gauges advanced, led by consumer stocks.

stabilize-1On Friday, the Chinese government reported gross domestic product grew at an annual rate of 6.7% in the first quarter of the year, down slightly from 6.8% in the fourth quarter. However, other indicators released showed new loans, retail sales, industrial output and fixed asset investment were all better than forecast.

Despite the positive economic news, the Hang Seng China Enterprises Index retreated 0.3% Friday after rising 5.9% during the week. And the Shanghai Stock Exchange Composite Index slid 0.1% for a 3.1% rise for the week.

While Asian currencies rose after China released its GDP, most emerging market currencies took a hit Friday after crude oil fell on news that Iran’s oil minister won’t attend a meeting on an output freeze in Doha this weekend.

After rising 0.7 this week, the MSCI Emerging Markets Currency Index was basically flat Friday. South Korea’s won strengthened 0.9% on the last day of the week.

“Data from China has been relatively strong, showing that the economy is stabilizing,” Hertta Alava, head of emerging markets at FIM Asset Management in Helsinki told Bloomberg. “A hard landing scenario seems quite distant now. Commodities have recovered from very low levels, which together with more benign interest rate outlook in US has strengthened emerging-market currencies.”

Nations representing about half the world’s oil production will gather to discuss freezing their output at January levels. Russia, Saudi Arabia, Qatar and Venezuela already made a preliminary deal in February and are seeking to add more producers.

Russia’s ruble fell 0.7% and Mexico’s peso dropped 0.8% after Brent crude slid more than 3%. But South Korea’s won rose on the Chinese data.

“Oil has really come off today having risen quite sharply over the past week or so,” William Jackson, a senior emerging-markets economist at Capital Economics in London, told Bloomberg. Jackson thinks Asian currencies will perform well as China stabilizes. “The market is realizing that it may have taken a step too far.”



Categories: Asia Unhedged, China, South Asia, Southeast Asia