Tue, 15 Oct 2019

Emerging markets will again be looking to central banks to provide the next leg-up in a rally that's making it the best September so far for stocks and currencies since 2013.

That's assuming there's no conflagration between the US and China over trade, no panic over the slump in Saudi Arabia's oil production, and no signs that global growth is slowing more than anticipated. The Federal Reserve and Bank of Japan decisions on Wednesday and Thursday will be key to sentiment, while a string of economic reports from China will also be a major driver. Not forgetting interest-rate decisions in Brazil, South Africa and Indonesia.

"Continued easing in the context of growth stabilisation would likely be a very compelling setting for emerging markets," said Morgan Harting, a New York-based money manager at AllianceBernstein, which manages $581 billion. "However, to the extent central banks deliver more stimulus than expected because growth is worse than expected, it would be hard to see emerging-market assets delivering very strong returns."

Developing-nation stocks, as measured by a MSCI index, climbed for a fourth week to break above their 200-day moving average on Friday, heralding further gains. Meantime, a gauge of emerging-market currencies approached its 50-day average after advancing 1.6% since end-August. The European Central Bank said Thursday it would restart quantitative easing.

Brazil's central bank is expected on Wednesday to cut interest rates by half a percentage point to an all-time low of 5.50% to support growthBrazil's Senate will vote this week on a landmark pension overhaul bill, a key step for investors betting on structural reform in Latin America's biggest economyIndonesia's bond market has attracted around $1.6 billion foreign money so far this quarter, higher than the previous three months with cumulative inflows of $1.5 billionChina will announce its September loan prime rate for the 1-year and 5-year tenures, following the unveiling of the new benchmark lending rates in August. Consensus is that the People's Bank of China will announce a five basis-point reduction to both tenuresThe Philippines publishes July overseas remittances and August balance of payments figuresPeru publishes its July economic activity index data on Monday. A positive reading would support expectations for improved growth in the second half

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