Emerging market stocks took a breather after their rally this week, with the index still on course for its fifth straight week of gains, while currencies were subdued against a rallying dollar.
The MSCI’s index for emerging market stocks and currencies were flat by 0835 GMT. Both indexes were set to post a weekly gain.
Inflows into emerging market equities outpaced their developed market peers for a second week, according to a note by TD Securities.
In Hungary, Prime Minister Viktor Orban told state radio inflation could start declining around February-March and drop to a single-digit annual rate by December.
The forint slipped 0.1% at 387.53 against the euro, but was still on track for its best weekly performance in over a month.
Other central and eastern European currencies were subdued in early trading.
The Russian rouble steadied above 69 against the dollar, buffeted by geopolitical tension as the United States piled more sanctions on Russia but retaining support from a favorable month-end tax period.
South Africa’s rand extended losses after the central bank raised its main lending rate by 25 basis points to 7.25% on Thursday, less than expected by most economists polled by Reuters.
“Even though the SARB is likely to still keep a close eye on inflation going forward and might sound more hawkish again, continued news about power cuts will probably ensure that economic concerns remain high so that investors are likely to remain cautious,” said You-Na Park-Heger, FX Analyst for Commerzbank Research in a note.
“Domestic risks currently seem too high for a ZAR recovery.”
The Turkish lira slipped 0.2% against the dollar.
Turkey’s central bank stuck to its forecasts for a sharp drop in inflation, saying the increasing predictability of the lira’s exchange rate plus financing support meant there was no longer the basis for large price rises.
Stocks in Turkey dropped 1.7%, with healthcare stocks leading sharp losses.
In Asia, China was still out on holiday until next week, though Hong Kong was back and the Hang Seng rose 0.5%, adding to sharp gains on Thursday.
Indian shares fell more than 1% to an over three-month low as some Adani Group companies plunged 20% and hit their lower circuits in the wake of a short-seller report on the conglomerate, which also weighed on financials.
The Pakistani rupee showed signs of steadying after steep decline, with hopes raised by an International Monetary Fund team visiting Islamabad in coming days to discuss resuming disbursements from a bail-out package. For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX
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For RUSSIAN market report, see (Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Christina Fincher)