LONDON: Emerging market equities powered to their highest in nearly 10 years on Tuesday as Asian shares reached another record, while the rand firmed to 2 1/2-year highs and China's yuan hovered near a two-year peak.
Emerging market stocks have surged 5 percent so far this year, helped by oil trading near $70 a barrel, a soft dollar and a pick-up in global economic growth, while US inflation remains subdued, tempering rate rise expectations.
MSCI's benchmark emerging equities index gained 0.7 percent after Asian shares reached another record high, as investors continued to pile into riskier assets.
Among the day's big movers were Hong Kong, up 1.8 percent to a record closing high, with Tencent jumping over 2 percent. Chinese mainland shares rose 0.8 percent, closing at a 30-month high, while index heavyweight South Korea gained 0.7 percent.
"We are seeing a lot of inflows to the EM asset class while the dollar has got weaker and weaker, which is supportive for emerging markets as a whole," said Trieu Pham, a strategist at MUFG. "So far, there has been nothing to change the (bullish) view on EM."
In another sign of the sector's health, emerging markets fund manager Ashmore posted a 7 percent rise in second- quarter assets under management, boosted by net inflows and investment gains.
The rally extended into some emerging European markets with Hungarian shares up 0.6 percent and Polish stocks up 0.3 percent.
With the dollar index down 0.4 percent to its lowest in more than three years, some currencies also gained.
Amongst the biggest gainers was the South African rand which rose as much as 0.8 percent, breaking through a technical barrier to hit a 2 1/2-year high against the dollar.
Investors have been eyeing reports that the ruling African National Congress party is preparing to discuss whether President Jacob Zuma should step down as head of state. Any sign that Zuma might go early has lifted South African assets .
"There are definitely upside risks to the currency due to the rumours, again and again, that Zuma will be removed," said Pham. "Markets have been disappointed in this before, but still the police are targeting (businessmen) the Guptas, and (new ANC leader Cyril) Ramaphosa's focus is on the economy and corruption."
China's yuan was also still trading near its strongest in more than two years after surging on Monday, underpinned by the Bundesbank's decision to include the yuan in its reserves.
But the Turkish lira weakened 0.6 percent towards its lowest in close to a month, pressured by threats from President Tayyip Erdogan to "strangle" a planned US-backed force in Syria.
The Indian rupee also fell 0.9 percent to a two-week low, hit by higher oil prices. India's trade deficit widened to its highest in more than three years in December.
In emerging Europe, the Romanian leu weakened 0.4 percent against the euro and stocks fell 0.5 percent after Prime Minister Mihai Tudose resigned. The ruling party meets later on Tuesday to discuss a replacement.
Ukraine's dollar bonds fell across the curve after the International Monetary Fund expressed concern that a draft law to create an anti-corruption court would not guarantee the new body's independence.
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