Emerging-market stocks hit a two-year high as risk appetite remains strong, with investors betting on monetary easing across core and developing economies. The MSCI Inc.’s EM equities gauge rose 1% to its highest level since April 2022, while developing currencies also gained ground against the dollar.
The dollar weakened against most major currencies ahead of US inflation data, which could increase the likelihood of Federal Reserve interest-rate cuts. Several emerging markets reported softer price growth this week, further fueling expectations of monetary easing.
In Romania, inflation slowed to its lowest pace since 2021, paving the way for the central bank to continue with monetary easing after the first rate cut in three years. Meanwhile, the Czech koruna and the Hungarian forint faced pressure following their inflation readings.
Czech Vice Governor Eva Zamrazilova hinted at potential monetary policy easing in light of slower-than-expected inflation. Analysts expect the Czech central bank to make gradual rate cuts in the coming months.
In Asia, China implemented measures to restrict short selling and quantitative trading strategies to support its stock market. Additionally, the financial regulator urged rural lenders to shorten the duration of their bond holdings to protect the banking sector amid a surge in the debt market.
Elsewhere, Malaysia’s central bank maintained its benchmark interest rate, allowing room to assess the impact of potential price hikes as the government phases out fuel subsidies.
Overall, the outlook for emerging markets remains positive as investors anticipate further monetary easing measures to support economic growth.
