Tuesday, August 6, 2013

Emerging markets: India leads stocks lower, leu hits six-day high

LONDON: 6 Aug, 2013(7STARNEWS)Emerging stocks slipped on Tuesday, with Indian stocks among the main under performers, though the Romanian leu hit a six-day high, reflecting rising investor confidence since Bucharest agreed a new IMF aid deal last week.

Indian stocks fell more than 2 per cent as banks declined on concerns the central bank would announce new cash-draining measures to defend the rupee after the currency hit a record low.

Emerging markets, particularly those with large current account deficits such as India and Turkey, have been under pressure in recent months due to expectations the United States will unwind monetary stimulus, and that growth in energy importer China will slow down.

\"We remain underweight in emerging market equities and anticipate further negative returns in absolute terms over the remainder of 2013 of between 5-10 per cent,\" said Deutsche analysts in a client note.

Benchmark emerging equities fell 0.7 per cent back to levels seen last Thursday, though emerging sovereign debt spreads tightened by 4 basis points to 338 bps over US Treasuries.

The leu hit a six-day high. Bucharest\'s agreement on a new 4 billion euro aid deal with the International Monetary Fund last week and slowing inflation have bolstered investor confidence, enabling the central bank to slash interest rates by an unexpectedly large half a point on Monday to a new record low to support the economy.

\"The unexpected nature of yesterday\'s decision will likely accelerate the positive effects we expected the easing cycle to have on the markets, likely hastening the drop in interbank rates, with positive side effects on the domestic debt and FX spaces,\" said ING analysts in a note.

The rupee\'s record low raised prospects the central bank would take fresh steps to bolster the currency, which has lost 12.6 per cent since the start of May.

The shekel was testing two-year highs following data on Monday showing a rise in Israeli consumer confidence in July.
News From: http://www.7StarNews.com

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