Best week in nine months for emerging-market stocks

Reaction to ECB member's remarks, strong data from US and expectations for China.

UAE stocks will be added to the MSCI emerging markets index in May. Above, the Dubai bourse. Ali Haider / EPA

Emerging-market stocks last week enjoyed their best week since June, lifted by strong US consumer data, dovish remarks from a hawkish European Central Bank (ECB) member, and expectations of a Chinese policy response to weak economic data.

The MSCI emerging markets index gained 4.2 per cent over the past week to close on 984.91, while the exchange-traded fund that follows this index, the iShares MSCI emerging markets index, rose for seven consecutive days from $38.98 to $40.74, a gain of 4.5 per cent.

Consumer spending rose 0.3 per cent in the US in February, suggesting a hastening pace of recovery.

Jens Weidmann, a member of the ECB’s governing council, and president of the Bundesbank, hinted that he would not necessarily object to a European bout of quantitative easing, which could provide succour for EM markets, which have suffered as tapering looms.

And Li Keqiang, China’s premier, went on record to say that the government has the “necessary policy tools” to address slower growth.

"It may be too early to call the bottom in emerging-market assets, but if we see signs that [Chinese data] is recovering, it could pave the way for a further rally," Allan von Mehren, the chief analyst at Danske Bank, told the Financial Times.

Despite regional tensions, the Micex, an index that follows the top 50 Russian stocks by liquidity, rallied slightly, climbing from 1,237.43 a fortnight ago to 1,344.12 at close on Friday. Still, the Moscow index remained significantly below its February value.

In May, UAE stocks will be added to the MSCI emerging markets index. Last week, Abu Dhabi's benchmark index gained 1.2 per cent over the week while the Dubai benchmark rose 0.7 per cent.

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