LONDON: Emerging market shares climbed to a fresh 20-day high on Wednesday, gaining for a third day, with eastern European assets seesawing on concerns whether Europe will be able to pull off a precarious rescue deal for Greece.
The MSCI broadest emerging market stock index rose 0.4 percent, while the Asia ex-Japan index climbed 0.2 percent.
Chinese shares extended Tuesday's bounce after last week's tumble, with fresh liquidity unlocked in the wake of a recent IPO wave. Many assets in central and southeastern Europe seesawed, however, as Greece's rescue deal was hanging by a thread, facing a domestic backlash and a number of key issues that still need to be resolved. Stocks in Poland, Hungary and Romania gained as much as 0.2 percent while shares in Serbia and the Czech Republic nudged lower.
In Greece itself, shares slipped for the first time in four sessions, sliding 1.5 percent, with banking stocks racking up some of the biggest losses. Yet currencies hovered a touch higher against the euro, with the zloty in Poland -- often traded as a proxy for the region as it is the biggest and most liquid market -- strengthening 0.2 percent. Some bonds matched the gains, with Polish and Czech five-year issues bouncing off recent lows, though 10-year issues in both countries nudged lower on the day.
"Emerging market currencies and bonds are moving on optimism that a deal with Greece is likely to happen, that's restoring a bit of confidence," said Regis Chatellier, strategist at Societe Generale. "But once we pass this hurdle, we are still a bit concerned about emerging market prospects, because of the volume (on global bonds) and we think this will keep things uncertain." Elsewhere, currencies took heart from a weaker dollar , even though the greenback was still hovering close to a two-week high hit on Tuesday when Federal Reserve Governor Jerome Powell revived expectations US interest rates will be hiked and on recent solid economic data.
The lira and the rand both gained 0.1 percent against the dollar. The shekel weakened 0.3 percent, slipping away from an eight-month high hit on Monday after the central bank held interest rates and signalled it would hold off bond buying. Russia's rouble failed to benefit from the weaker greenback and higher oil prices, easing by 0.7 percent on lower demand due to tax payments. Moscow dollar-denominated shares lost 0.2 percent.
Ukraine's Eurobonds maturing in 2017 and 2022 rose as much as 0.313 cents after Kiev said last night it had resumed local debt sales, raising $140 million in its first one-year dollar bond auction since February. Meanwhile Kazakhstan said it planned to issue a Eurobond of at least $2 billion next week, aiming to use the proceeds from the issue to finance its budget deficit. Economy Minister Mihaly Varga said Hungary may issue a foreign currency bond next year when debt expiries rise, though Budapest remains committed to reducing foreign currency debt as a proportion of total debt, according to a daily newspaper.
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