Bengaluru: Emerging-market stock indexes inched higher on Monday, the last trading day of a rough year for developing economies, as investors cast a cautious eye on President Donald Trump’s latest claims of “big progress" in Sino-US trade relations.
Over the weekend, Trump tweeted that he had a “long and very good call" with Chinese President Xi Jinping and that a possible trade agreement between the two sides was progressing well.
With most markets already shut for the New Year holiday, that was enough to drive a fourth day of gains for India’s benchmark indices , as well as a gain of 0.5% in South Africa.
But overall, MSCI’s index of emerging-market shares was still set to log losses of more than 16% for 2018 as a whole.
“(The) market is more likely to stay put at this point and wait for further solid evidence from the face-to-face meeting in mid-January," analysts at Mizuho Bank said in a note.
The trade dispute between the world’s two biggest economies has been a major factor worrying financial markets all year.
After agreeing in November to halt additional tariffs and reach an agreement within 90 days, a US trade team will travel to Beijing next week to hold talks with Chinese officials.
In a year where a cocktail of higher oil prices, rising borrowing costs and domestic politics have hurt riskier assets, a 3 to 6% yearly gain for Indian indices makes it one of the few emerging markets in the black.
Russian stocks, which had their last trading session on Friday, will end with a 12% rise. Stock markets in China, Turkey and South Africa are set to post their worst year in a decade.
Most Asian currencies gained on Monday as the dollar trod water. The South African rand gained 0.4%, while Turkey’s lira weakened, on course for a yearly loss of more than 28%.
Concerns about President Tayyip Erdogan’s influence on monetary policy and relations with the United States have been soothed by September’s 6-percentage-point hike in interest rates and the release of a jailed US pastor. But fears over high prices of imported oil will continue to have an effect.
The rand is also set for a yearly loss after South Africa slipped into its first recession since 2009 in the second quarter.
The worst performer of commonly watched emerging-market currencies is Argentina’s peso, which has halved in value against the dollar.
Runaway inflation has led Argentina to raise benchmark interest rates dramatically - first to 45%, then to 60% - pushing its economy into recession and prompting it to turn to the International Monetary Fund for a funding facility to shore up its finances and halt the currency’s plunge.
Eastern European currencies barely moved on Monday against a steady euro. On the year, a roughly 3% fall for the Hungarian forint would be its worst result since 2014.