LONDON: Emerging stocks gained for a fourth straight day, reaching their highest in more than a month on Thursday, as rising oil prices increased investor appetite for riskier assets. Turkish assets remained under pressure after a bomb blast in Ankara.
Signs the Federal Reserve was scaling back its plans for rate increases also helped to offset a fresh round of rating cuts on oil producers, a rate hike in Mexico and emergency moves by Venezuela to try and shore up its finances.
"Oil prices have been supported by the production freeze agreement between Russia and Saudi Arabia - Iran gave it a cautious welcome and the market wants to take this as a positive signal," said Sebastian Barbe, head of EM FX and fixed income at Credit Agricole.
MSCI's emerging equity index was up 1.5 percent. Eastern Europe shares continued their hot streak with another 1.6 percent rise as dollar-denominated stocks rallied 2.25 percent in Russia and Hong Kong and South Korea jumped 2.3 percent and 1.3 percent respectively.
The exception to the rally was mainland China , where shares drifted lower after producer price inflation fell 5.3 percent in January, reinforcing deflationary concerns.
Higher oil prices helped offset ratings downgrades on oil producers, including a double-notch cut for Saudi Arabia by Standard & Poor's on Wednesday. Barbe said the vulnerability of oil exporters had largely been priced in to currency markets.
Saudi Arabia's five-year credit default swaps (CDS) rose 6 basis points from Wednesday's close to 180 bps, according to data from Markit. Bahrain's CDS rose 15 bps to 395 bps after it was stripped of investment grade status.
Brazil, Kazakhstan and Oman were also downgraded, but Russia was spared. The Russian rouble slipped slightly against the dollar after a big jump on Wednesday. The Kazakh tenge gained 1.5 percent.
Turkish assets struggled after a suicide car-bomb attack killed 28 people in the capital and Turkey carried out air strikes against Kurdish camps in northern Iraq .
The lira weakened 0.2 percent against the dollar and the yield on Turkey's sovereign dollar bonds rose 4 basis points (bps) on the day to 335 bps.
"Last night's deadly bomb attack in Ankara is yet another sign of the risks that can lead to a tougher domestic political stance," said Simon Quijano-Evans, chief EM strategist at Commerzbank in London. "A tough time for Turkish assets."
A widely expected 25-basis-point rate cut by Indonesia's central bank at the end of Asian trading saw the country's rupiah drift higher as the bank also upgraded its growth forecasts for the year.
In Latin America, the Mexican peso strengthened against the dollar after surging nearly 5 percent on Wednesday after a surprise interest rate rise to 3.75 percent.
Eyes remained trained on Venezuela, too. It devalued the bolivar on Wednesday and raised fuel prices in an attempt to tackle a growing economic crisis, with investors increasingly concerned about a potential default.
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