Stocks index recovers on Hong Kong shares rally

A rally in Hong Kong stocks lifted a broader index of emerging market shares from one-week lows on Thursday, while losses in most other bourses amid recession worries capped gains.

MSCI's index of emerging market stocks EFS rose 1.0% after two days of declines. Hong Kong's tech, internet and property stocks rallied, lifting the main index HSI 3.4% as investors cheered some easing of COVID curbs in China.

But, as recession fears lingered, exacerbated by worries about the U.S. Federal Reserve's hawkish monetary policy stance, risk sentiment took a hit, leaving a just a handful of emerging market stocks indexes with small gains.

The broader EM index is down about 0.6% so far this week, taking losses this year to 21.4%, on track for its worst year since 2008.

But Thornburg Investment Management sounded optimistic on the outlook.

"EM equity valuations have been compressed by high local interest rates and political concerns," Josh Rubin, portfolio manager at Thornburg.

"The set-up is now reversing, which can also be a tailwind for EM equity valuations... EM economies are well-positioned to reaccelerate in 2023 and beyond."

Most currencies made measured moves against the dollar. Against a stronger euro, Hungary's forint EURHUF slumped 1.0% after data showed a yawning trade deficit that rose year-on-year and widended more than anticipated.

Separate data showed inflation in Hungary picked up to an annual 22.5% in November from 21.1% in October, coming in above forecasts, and limiting the central bank's room to cut rates.

"We expect inflation is likely to peak and soften in emerging markets sooner than developed markets. And this has historically been an attractive set-up for EM," Rubin said.

The Polish zloty EURPLN rose 0.2% gains the euro on Thursday, outperforming other regional peers.

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