Emerging market assets staged a strong rebound on Thursday, fueled by optimism surrounding China’s potential stimulus package and the possibility of an upcoming trade deal with the United States, Bloomberg reports.
This recovery came despite initial anxieties sparked by the US election results, which threatened to introduce fresh volatility into an already uncertain global economic landscape.
The Republican victory in the US election had triggered concerns about heightened trade tensions and potential tariffs for developing economies, leading to a sharp dip in emerging markets on Wednesday. MSCI’s emerging market equity index witnessed its steepest drop in a week, while 10 out of 23 currencies tracked by Bloomberg plummeted by at least 1% against the dollar.
However, sentiment swiftly shifted on Thursday. MSCI’s developing-market index climbed by 0.7% in early European trading, buoyed by gains in Asian stocks such as Meituan, Tencent Holdings, and Taiwan Semiconductor Manufacturing Co. The offshore yuan rebounded from its steepest plunge since 2019, triggered by the US election results. Traders reported that Chinese state banks intervened to stabilize the yuan by selling dollars. The Korean won and the Indonesian rupiah also gained ground.
South Africa’s rand, a currency highly sensitive to China’s economic performance, emerged as the standout performer, benefiting from the anticipation of a stimulus boost. Investors are eagerly awaiting the conclusion of the Chinese legislative meeting on Friday, hoping for new measures to mitigate the impact of any potential tariffs.
This optimism was further strengthened by the release of China’s October export data, which revealed a rapid acceleration, exceeding analysts’ forecasts and marking the fastest growth since July 2022.
Later in the day, the US Federal Reserve’s interest rate decision will take center stage. While a 25 basis point cut in the benchmark rate is widely expected, following a half-point reduction in September, the trajectory beyond today remains uncertain.
Among emerging-market central banks, the Czech Republic is likely to press on with its eighth consecutive interest-rate cut, prioritizing weak economic growth over concerns about inflation. In Peru, policymakers are expected to trim the nation’s borrowing costs by a quarter point to 5%, with inflation hovering near the midpoint of their 1%-to-3% target range.
Overall, Thursday’s market rebound signals a renewed sense of optimism among investors, driven by expectations of Chinese stimulus measures and a possible trade deal with the US.
