Latest news with #emergingmarkets
CNA
11 hours ago
- Business
- CNA
Indian rupee, bonds set to be among top three Asian beneficiaries of foreign inflows, BofA Sec exec says
MUMBAI :Indian markets will likely be among the top three in Asia to attract foreign inflows once tariff-related uncertainties ease, with the rupee and local currency-denominated bonds benefiting the most, an executive from BofA Securities told Reuters. "India within Asia should be one of the best markets for investments as they have a lot of drivers for growth which other markets do not have," David Hauner, head of global emerging markets fixed income strategy at BofA Securities, said on Tuesday. Taiwan and South Korea could also invite investor interest, he said. The rupee was at 85.59 on Tuesday and is nearly flat for the year after easing 2.9 per cent in 2024. Hauner expects the unit to appreciate to 84 against the U.S. dollar by end-2025. While the rupee could rise above 84 next year, aided by a weaker greenback, Hauner said he expects it to stay around that level as the central bank accumulates reserves. A soft dollar and the possibility of rate cuts from emerging market central banks is likely to draw investors, Hauner added. "I would expect that we will receive more inflows from the second half of the year, and we would see more proof that inflation globally is coming down and people will get more comfortable with EM fixed income, leading to more inflows." U.S. bond yields have risen and the dollar has fallen this year on fears that President Donald Trump's policies will be inflationary and lead to a selloff in Treasuries. Despite the upbeat outlook, foreign investors reduced their holdings of Indian government bonds in April and May, offloading over 320 billion rupees ($3.74 billion) on a net basis. Hauner said the selloff was sparked by worries over the impact of trade tensions, but added that a lot of capital is parked in U.S. money market funds, which could start flowing in later this year. BofA Securities expects the Reserve Bank of India to cut the policy repo rate by another 50 basis points over the remainder of this year. The central bank has already delivered 50 bps of reductions in 2025. Hauner prefers India's five-year government bonds and expects yields across the bond curve to decline by 25-50 bps. The five-year bond yield was at 5.85 per cent on Tuesday.
Bloomberg
13 hours ago
- Business
- Bloomberg
Emerging-Market Stocks Gain as China Data Refuel Stimulus Hopes
Emerging-market stocks advanced for the first time in three days as a slump in China's factory activity increased bets on more economic stimulus. The benchmark MSCI EM index rose 0.4% after data showing China's manufacturing sector had its worst slump since September 2022, with higher tariffs taking a toll on smaller exporters. The onshore CSI 300 Index gained 0.3%, while a gauge of Chinese stocks listed in Hong Kong jumped 1.9%.
Bloomberg
14 hours ago
- Business
- Bloomberg
Block Trades Power India Stock Trading Value to Seven-Month High
Sign up for the India Edition newsletter by Menaka Doshi – an insider's guide to the emerging economic powerhouse, and the billionaires and businesses behind its rise, delivered weekly. A spate of block trades has pushed India's cash equity trading value to a nearly seven-month high.
Bloomberg
16 hours ago
- Business
- Bloomberg
Harling: Biggest EM Challenge is Currency Stability
Bonds in Australia and Singapore gained as questions about the appeal of US Treasuries sent investors toward top-rated alternatives. But Emerging-market stocks fell to their lowest level since May 9 as fresh trade tensions between the US and China clouded the global outlook. Victoria Harling, Co-Head of Emerging Market Corporate Debt at Ninety One spoke to Bloomberg's Horizons Middle East and Africa anchor Joumanna Bercetche on the mood in emerging markets. (Source: Bloomberg)
Reuters
2 days ago
- Business
- Reuters
Weak dollar reprises its role as 'carry' trade funder
MUMBAI, June 2 (Reuters) - The U.S. dollar's weakness since the start of Donald Trump's presidency has made it the preferred funding currency for popular "carry" trades, fuelling heavy flows into higher-yielding emerging market currencies. Dollar-funded carry trades in the Indonesian rupiah , Indian rupee , Brazilian real , Turkish lira among other currencies, are back in vogue, fund managers said. In a typical currency carry trade, investors use cheap-to-borrow currencies to fund investments in those with better yields. Returns are boosted if the borrowed currency weakens. The dollar, traditionally less favoured than the Japanese yen or Swiss franc for such trades, has become the funding currency of choice as Trump's trade war stokes recession worries and an investor retreat from U.S. Treasuries. Carl Vermassen, a portfolio manager at Zurich-based asset manager Vontobel, has added to carry trades on the rupee and rupiah. "Emerging market local currency was basically shunned for the simple reason: to avoid local currency risk at a time of an almighty dollar," he said. "But, given most investors deem U.S. exceptionalism to have ended, things are changing." Claudia Calich, head of emerging market debt at M&G Investments, also expects dollar weakness to persist and support carry trades. The London-headquartered fund oversees more than 312 billion pounds ($423.5 billion) and favours the rupee and Philippine peso for carry positions within Asia and the Brazilian real and Mexican peso in Latin America. The more investors rush back into dollar carry trades, the deeper the dollar's losses are likely to be, analysts said. The dollar index has fallen 8.5% so far this year, dropping below the critical 100 mark in mid-April for the first time in nearly two years. It was last seen at 99.30. That means investors are finding good carry not just in the likes of the rupee and rupiah, whose yields are above those in the United States, but even those with low interest rates such as the South Korean won . The won has led gains in Asian currencies this year with a 6.7% rally against the dollar. The yield advantage over dollars, or the "carry", measured by the three-month tenure is 2% on the Indian rupee and 1.2% for Indonesia's rupiah. Brazil's real gives a much higher carry at 9% but is far more volatile, meaning the trade could go horribly wrong if the currency depreciates, instead of appreciating. The future expected 3-month volatility, also called implied volatility, for the real is 8.1% compared with 4.7% for the rupee. Goldman Sachs said carry trades were "a big theme" in recent meetings with its New York clients, with interest growing in Latin American and European markets. "If volatility settles some more, we will start to hear more about dollar-funded carry trades," ING Bank said. "This could be a story for this summer." Since "FX carry trades" typically involve investments in bond or money markets in these destinations, analysts expect to see heavy flows into emerging markets. Data for April shows investors bought bonds worth $8.92 billion, the highest for any month since last August, in South Korea, India, Indonesia, Thailand and Malaysia. While some of those flows could have been straight real-money investments into these markets, analysts say carry trades also boomed. In South Korea, foreign investors bought $7.91 billion in bonds, the most since May 2023. Tom Nakamura, vice-president and head of fixed income & currencies at Canadian fund AGF Investments, finds carry trades in Turkey attractive since the central bank's adoption of more orthodox monetary policy. Turkey's benchmark rates are at 46%(TRINT=ECI), opens new tab.
