July 13 (Reuters) – Emerging market stocks rallied on Thursday with the dollar taking a hit on growing bets of an imminent end to the U.S. rate-hiking cycle, while Pakistan dollar bonds jumped after the International Monetary Fund cleared a $3 billion bailout.
The MSCI index for EM stocks .MSCIEF gained 1.4%, touching a three-week high, led by heavily-weighted China’s blue-chip stocks .CSI.
China’s Hong Kong-listed tech giants .HSTECH advanced 3.8% 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 .MIEM00000CUS rose 0.5%, 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 U.S. inflation as a signal rate rises will be all but finished by month’s end.
“With uncertainty in U.S. 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 PKR= gained after the IMF cleared a $3 billion bailout programme, which will immediately disburse about $1.2 billion to help stabilise 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 ZAR= jumped 0.8%, slipping below 18 per dollar for the first time since mid April, ahead of local mining output data.
The Russian rouble RUBUTSTN=MCX 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% in June for the first time since 2022 start. Another set showed Romania’s consumer price rose 10.25% year-on-year in June from May’s 10.64%, 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 EURRON= and Czech crown EURCZK= 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 KRW= was up 0.4%.
(Reporting by Ankika Biswas in Bengaluru;Editing by Krishna Chandra Eluri)
