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Robust China manufacturing data lifts sentiment
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Russia factory activity expands fastest in six years
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Turkey Feb manufacturing barely grows
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Stocks soar 2.1%, FX up 0.6% against softer dollar
By Shubham Batra and Amruta Khandekar March 1 (Reuters) - Emerging market stocks began March on a high on Wednesday as solid growth in Chinese manufacturing activity helped to revive sentiment following concerns over a prolonged period of U.S. interest rate hikes. The MSCI EM equities index jumped 2.1%, snapping three straight days of losses, after data showed China's manufacturing activity expanded at the fastest in more than a decade in February. China stocks gained 1.4%, and the yuan firmed. Hong Kong's Hang Seng index closed up 4.2%.
Emerging market currencies rose 0.6% by 0900 GMT as the dollar weakened. "The manufacturing data was quite strong from China and we actually even see further upsides from the recovery over there which would be beneficial to other emerging market indices," Filippos Papasavvas, markets economist at Capital Economics, said.
"But that being said, we think the bigger story in the near term is the souring of appetite for risk amid recession in advanced economies." After a rally at the beginning of 2023, EM assets came under pressure in February as signs of strength in the U.S. economy drove fears of more interest rate hikes by the Federal Reserve. Among individual currencies, the Turkish lira was flat as the country's factory activity expanded only slightly in February after earthquakes led some firms to suspend production. The South African rand gained 1.3% after Chinese data boosted risk-taking among investors. Russia's rouble was 0.3% weaker against the U.S. dollar as the Russian currency lost support from a favourable tax period and remained under pressure from the risk Western restrictions on Moscow's energy exports will reduce its foreign currency earnings. Separately, activity across Russia's manufacturing sector expanded at its fastest rate in six years in February, driven by rises in production and new sales, while higher input costs added to inflationary pressures. In central and eastern Europe, Hungary's forint added 0.7% against the euro as Hungary's seasonally-adjusted Purchasing Managers' Index rose to 56.5 in February from 55 in January.
The Polish zloty was up 0.2% against the euro after Poland's manufacturing sector shrank again in February but showed signs of stabilising as new orders declined at a slower pace and inflation pressures eased. Elsewhere in emerging markets, the Russia-Ukraine conflict will form an important part of discussions at a G20 foreign ministers meeting. Host India is confident that economic challenges created by the war will get equal attention, India's foreign secretary said. (Reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Barbara Lewis)
