Emerging stocks diverge after Bank of Japan inaction

LONDON: Emerging stocks were pulled in conflicting directions on Thursday, with Asian markets weighed down by lack of action from the Bank of Japan while stronger oil prices and a weaker dollar helped the Russian rouble.

The Bank of Japan held off from expanding monetary stimulus on Thursday, defying market expectations for action, sending the Tokyo bourse lower and dragging down stock markets across the region with bourses in Taiwan, India and Malaysia all down more than 1 percent, some hitting multi-year lows.

Many bourses across central and eastern Europe followed suit while equities in Turkey slipped 0.6 percent to trade at the lowest in more than two weeks.

"The fact that the Bank of Japan refrained from increasing its ... stimulus could be a signal that they could be reaching its limits," said Rabobank's Piotr Matys.

"Now if more major central banks are indeed close to reaching limits with regards to how much they can provide at a time when the global economy is still relatively weak, then I am concerned about the sustainability of that recovery in (emerging European) currencies this year."

However, South African stocks gained 0.4 percent while Russian dollar-stocks jumped 1.6 percent, leaving the overall MSCI emerging market index unchanged.

Tokyo's policy makers also sent the yen soaring and hit the dollar index - a measure of the greenback's performance against six major currencies - which had already come under pressure after the US Federal Reserve on Wednesday indicated it was not in a hurry to raise interest rates.

Across currencies, Russia once again chalked up solid gains.

The rouble strengthened 0.4 percent against the dollar ahead of a central bank meeting on Friday, where policy makers are expected to hold their main policy rate and await more evidence that inflation is under control.

South Africa's rand and Turkey's lira both traded flat after the latter touched on the weakest level in a week in early trade.

Across central and eastern Europe, currencies traded steady to lower against the euro. Hungary proved the exception with the forint strengthening 0.2 percent after Deputy Governor Marton Nagy said markets had been too dovish on the central bank, signalling the bank would cut at most twice more during its currency cycle.