Emerging Markets on the Rise
Emerging stocks have seen a significant increase, reaching a fresh two-month high, with the Hungarian forint also strengthening due to hopes of an IMF aid deal. However, the gains on most markets were limited by concerns over Greece’s debt crisis. The MSCI emerging equities index rose by 0.3%, while the Thomson Reuters Emerging Europe index increased by 0.5%.
Factors Contributing to the Rise
The rise in emerging markets can be attributed to several factors, including the possibility of the International Monetary Fund (IMF) taking further action to resolve the European debt crisis. Additionally, better-than-expected economic data from China has also contributed to the increase in risk appetite. The Chinese growth numbers suggest a soft landing rather than a hard landing, which has reassured investors.
Market Performance
The emerging markets, which underperformed developed markets last year, saw a significant increase of nearly 2% on Monday. The index is up 6.5% so far in January. According to Sebastian Barbe, head of emerging market strategy at Credit Agricole, "We have had a very strong rally on equities, so we are seeing a bit of consolidation." The forint jumped 1% to its highest in nearly a month against the euro, while Hungarian stocks also hit a near one-month high.
Hungary’s Economic Situation
Hungary’s economic situation has been a concern, with the forint hitting record lows earlier this month after falling 10% in 2011. The country’s yields soared amid concerns that it may have trouble refinancing external debt this year. However, the government’s possible compromise with the EU has led to a rally in the forint. Barbe warns that the forint remains vulnerable, despite the recent gains.
Other Emerging Markets
Elsewhere in central Europe, the Polish zloty hit its highest since the end of October before trimming gains. The Turkish lira hit its highest in over a month against the dollar, following successful local debt auctions. The improved risk appetite has also boosted the lira, with analysts expecting further gains.
South Africa’s Economic Performance
South African shares hit an all-time high for the second straight day, with mining stocks performing particularly well after positive GDP data from China. The country’s inflation rate was below forecast at 6.1%, while retail sales slowed, indicating that the central bank would probably keep interest rates unchanged.
Conclusion
In conclusion, emerging markets have seen a significant increase, driven by hopes of an IMF aid deal and better-than-expected economic data from China. While concerns over Greece’s debt crisis have limited gains, the overall trend is positive. The Hungarian forint and Turkish lira have seen significant gains, while South African shares have hit an all-time high. As the global economic situation continues to evolve, it will be interesting to see how emerging markets perform in the coming months.
