LONDON: Emerging equities rose on Thursday to touch a two-week high after the U.S. Federal Reserve took a cautious tack, while a rise in oil prices helped currencies such as the Russian rouble and Kazakh tenge to firm.
The benchmark emerging equity index was up 0.65 percent, helped by gains in Russia, where dollar-denominated stocks rose 2.5 percent, South Africa, where the blue-chip Top 40 was up 1.5 percent and Turkey , up 0.9 percent.
There were also gains across markets in Asia, Eastern Europe and even the Middle East, where an increase in oil prices on the possibility of output cuts leant support.
Investor appetite for emerging markets improved slightly following the Fed's meeting on Wednesday at which it kept interest rates unchanged and said it was "closely monitoring" global economic and financial developments.
Traders are now betting that it will wait until July before it hikes again.
"The greater concern about the global environment shown by the Fed should encourage investors to realise that they are not about to go crazy with rate hikes this year," said Rob Carnell, an analyst at ING.
"We can see markets taking some comfort from these words, though without a meaningful improvement in the run of macro data, in particular from China, it is hard to see this having a lasting effect."
Chinese mainland stocks fell around 2.8 percent , taking losses in January to about 25 percent, with both indices back down at late 2014 levels.
However, trading was light as many investors have grown disenchanted with the volatile mainland market, and the Hong Kong bourse was amongst the strongest performers in Asia, up 0.75 percent.
Currencies also firmed, with South Africa's rand up 0.9 percent against the dollar ahead of an interest rate decision later on Thursday. The money market is pricing in a nearly 70 percent chance of a 50 basis point rise in benchmark rates, as the inflation outlook has deteriorated.
"They are going to have to hike, few people are going to argue with that considing the fall in the rand since the last meeting," said Paul Fage, a senior strategist at TD Securities. "But the question is whether they are going to stick to their gradulist approach or do a bigger hike."
The Russian rouble strengthened 2.6 percent and the Kazakh tenge firmed 1.9 percent following a 4 percent surge in oil prices on Wednesday after Russia indicated it might co-operate with OPEC on production cuts.
Fellow oil producer Azerbaijan is planning to ask the International Monetary Fund for $3 billion in financial aid and will request $1 billion in World Bank loans, as it struggles to cope with currency and budget pressures.
The manat has fallen by more than a third against the dollar in the past month, and was down 2.2 percent on Thursday.
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