Emerging shares at 3-month highs

Emerging stocks danced near three-month highs with the impasse over Greek debt talks limiting gains.

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Emerging stocks danced near three-month highs on Wednesday with the impasse over Greek debt talks limiting gains while the Hungarian forint jumped to a three-month peak although the central bank confounded market expectations of a rate hike.

Russia's rouble rose to its highest in over four months against its dollar/euro basket, propelled by month-end tax payments from exporters and strong oil prices.

Fresh evidence that Germany would avoid recession kept sentiment buoyant, though the lack of a breakthrough in talks between euro zone ministers and Greece's private creditors reined in gains.

“The momentum on emerging markets has generally been stronger and the collapse of implied volatilities across all asset classes suggests a more constructive risk environment,” said Imran Ahmad, emerging market strategist at RBS.

“Most people are underinvested in emerging markets and Asia and Latin America remain relatively immune to the euro zone crisis.”

The emerging stocks benchmark was flat, holding steady at its highest since the end of November while emerging hard-currency sovereign debt narrowed 1 basis point to trade 360 bps over US Treasuries.

Emerging European shares slipped 0.6 percent with Polish stocks off seven-week highs reached early in the day and the key Czech share index down for its second straight session.

Hungary's share index, which last week chalked up its largest weekly gain since July 2009, continued to retreat from Monday's five-month high, easing some 0.8 percent.

Turkish stocks traded near seven-week peaks.

FORINT, ROUBLE

Emerging currencies traded with a firmer tone. The forint was at its highest against the euro since October.

The unit has risen more than 5 percent in the last week with Prime Minister Viktor Orban's pledge on Tuesday to address European Union concerns over changes to Hungarian law that have blocked the resumption of an international financing package providing a further fillip.

Investors were surprised by the central bank's decision on Tuesday to leave Hungary's base rate unchanged as most had anticipated a third successive 50 basis-point rate increase to support the currency.

“A supportive global environment and probably still short positioning in the forint is so far protecting the currency. We think on the multi-week horizon, the lack of rate hike might be a mistake and the bank could be forced to increase rates at a later stage,” said UniCredit in a note.

Elsewhere, the Polish zloty slipped after climbing to a five-week high against the euro early in the day while the Czech crown was down 0.3 percent.

Turkey's lira dipped after climbing to its strongest against the dollar since early December in the previous session.

Russia's rouble rose for the third straight day against its dual-currency basket and the dollar, shrugging off recent data that slowed a deepening slowdown in the country's industrial output.

“The rouble is benefiting from high oil prices. The elections in March also suggests that the government will want to keep the currency stable,” said RBS' Ahmad. - Reuters

Source: http://www.iol.co.za/emerging-shares-at-3-month-highs-1.1220187

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