LONDON, July 19 (Reuters) - Emerging market equities dipped
on Friday, led by losses in Chinese property and financial
stocks while Hungarian shares fell sharply on concern about
government plans to modify the terms of private foreign currency
Emerging markets have begun to stabilise after weeks of
outflows and losses suffered on concern about an end to the U.S.
monetary stimulus which has boosted demand for high-yielding
In a much anticipated speech to Congress on Thursday,
Federal Reserve Chairman Ben Bernanke said it was too soon to
make a call on dialling back quantitative easing in September.
Despite Friday's losses, stocks were heading for their
second week of gains.
'We are in a strong dollar but low interest rates
environment which will take some pressure off from emerging
markets in the short term and we have indeed seen a bit of index
recovery but the issues around China and corporate governance
mean we probably have more underperformance to come,' said
John-Paul Smith, global emerging equities analyst at Deutsche
Chinese stocks fell for a third straight
day due to declines in financial and property firms.
After the market close China announced it was relaxing
controls on bank deposit rates, part of long-awaited interest
India's central bank likely stepped in via state-run banks
again, dealers said, to prop up the rupee, which has
fallen back to levels seen before the central bank moved on
Monday to drain liquidity and push up short-term interest rates
to defend the currency. A government bond auction on Friday
would be a key test of the central bank strategy, with investors
betting the sale would be a struggle.
Emerging equities dropped 0.5 percent, with
Hungarian stocks falling more than 2 percent to their
lowest in more than two weeks.
Hungary's OTP Bank Chief Executive Sandor Csanyi
sold a big chunk of his shares in the bank on Thursday, driving
OTP shares lower after two days of steep falls on government
plans to intervene on foreign currency loan contracts.
Hungary's forint hit two-week lows against the euro .
Emerging market debt spreads widened by 1 basis
point to 321 bps over U.S. Treasuries. Emerging debt spreads
have been tightening in recent days after widening as much as
100 bps in June.
In the week leading to July 17, emerging market outflows
continued. Equity funds saw $0.04 billion in outflows, while
bond funds suffered $1.3 billion of outflows, according to banks
citing EPFR data.
(Reporting by Philip Baillie and Sujata Rao; Editing by Susan
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(Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg on year Morgan Stanley Emrg Mkt Indx 952.42 -5.02 -0.52 -9.74 Czech Rep 888.51 -3.18 -0.36 -14.46 Poland 2306.71 +6.38 +0.28 -10.70 Hungary 18457.99 -511.34 -2.70 +1.57 Romania 5401.88 -28.46 -0.52 +4.90 Russia 1375.41 -1.94 -0.14 -12.73 South Africa 36212.45 -380.84 -1.04 +4.07 Turkey 76014.15 -1008.61 -1.31 -2.81 China 1992.65 -30.75 -1.52 -12.18 India 20167.89 +39.48 +0.20 +3.82 Currencies Latest Prev Local Local close currency currency % change % change in 2013 Czech Rep 25)
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