Nov 30 (Reuters) – Most emerging markets in Europe, Middle East and Africa retreated on Monday, but were set for stellar monthly gains as a combination of optimism over a COVID-19 vaccine and stable U.S. politics drove buying of risk-driven assets.
Turkey’s lira was set to outperform its regional peers with a near 7% monthly gain, while Istanbul stocks were set for their best month in more than 11 years.
The lira rose slightly versus the dollar after data showed the country’s economy rebounded more than expected in the third quarter, after contracting nearly 10% in the prior quarter.
Assets in Turkey benefited from improving investor confidence after changing its central bank head and finance minister. But overall sentiment was still mixed, owing to surging COVID-19 cases and fiscal weakness.
“Q4 will feature much calmer activity because the corona second wave took hold not only in Turkey but, crucially, in Turkey’s trading partners. Q3 GDP data are not only backward-looking, but also unlikely to be replicated again in coming quarters because the underlying policy mix has changed,” Tatha Ghose, FX and EM analyst at Commerzbank, wrote in note.
Broader emerging-market assets were also set for large monthly gains on the back of a series of positive COVID-19 vaccine updates.
Joe Biden’s U.S. presidential win also bolstered hopes for calmer trade policies in the world’s largest economy.
The MSCI’s index of emerging-market stocks was set for its best month since March 2016, up about 10% in November.
South Africa’s rand weakened against the dollar ahead of local trade and budget data, which is expected to provide more insight on the economy. The South African economy was among the worst hit by the coronavirus due to a strict lockdown to curb its spread.
South African stocks fell about 0.9%.
Polish stocks were set to outperform their EMEA peers with a more than 20% bounce in November, helped by new government stimulus to counter the economic ructions from the coronavirus.
Russia’s rouble was set to add about 4% for November, aided by gains in the oil market on expectations of recovering demand.
Emerging-market debt was also seen benefiting through November, as improving risk appetite was aided further by relatively higher borrowing rates and a series of new issuances.
Reporting by Ambar Warrick in Bengaluru; Editing by Pravin Char