Nov 6 (Reuters) – Emerging markets stocks opened the week on a flying note on Monday led by gains in South Korean shares after the country re-imposed a short-selling ban, while currencies rose on hopes that the U.S. Federal Reserve was done with its rate hiking cycle.
The MSCI index tracking emerging markets equities .MSCIEF jumped 2.2% by 0954 GMT and was on track for its best day since June.
South Korea’s benchmark KOSPI .KS11 index soared 5.7%, recording its best session since early 2020, as authorities said on Sunday they will re-impose a ban on short-selling through the first half of 2024 to promote a “level-playing field”
China shares .SSEC rose 0.9%, while the yuan CNY=CFXS gained 0.4% ahead of key domestic economic data this week, including crucial inflation numbers.
The world’s second-largest economy also recorded its first-ever quarterly deficit in foreign direct investment (FDI), according to balance of payments data, underscoring Beijing’s challenge in wooing overseas companies in the wake of a “de-risking” move by Western governments.
Global fund managers sold China equities sharply in October despite further steps from authorities aimed at boosting the country’s economy, according to a report from Morgan Stanley.
The MSCI gauge for emerging markets (EM) currencies .MIEM00000CUS also strengthened 0.6% against a weak dollar, and was set for its best day since March, if gains hold.
November has been a bright start for EM assets after a dismal October, as comments from Fed Chair Jerome Powell and a weak jobs report last week boosted risk appetite on hopes that the central bank was done with its tightening cycle.
Investors will keenly focus on the U.S. debt auctions this week, after the U.S. Treasury Department on Wednesday said it will slow the pace of increase in its longer-dated debt auctions in the November 2023 to January 2024 quarter.
“Risk appetite has vastly improved and one of the big headwinds to emerging markets FX has now been cleared and that has been the building risk premium in Treasury yields,” said Simon Harvey, Head of FX Analysis, Monex Europe.
“The currencies that are being the most sensitive to these dynamics, the Indonesian rupiah or the South Korean won, they’re posting huge gains off on the back of this.”
The Korean won KRW= and the rupiah IDR= jumped 1.2% and 1.3% respectively.
Elsewhere in Central and Eastern Europe, Czech working day adjusted industrial output fell higher-than-expected 5.0% year-on-year in September, after a 1.7% fall in August, data showed.
(Reporting by Siddarth S in Bengaluru; Editing by Janane Venkatraman)
