UPDATE 1-EMERGING MARKETS-Stocks, FX up post-G20 as dollar falls

* Emerging stocks see biggest one-day gain in two weeks

* Russian, South African stocks and FX boosted by commods

* Central bank decisions in Hungary, Israel

By Michel Rose

LONDON, Oct 25 (BestGrowthStock) – Emerging equities raced to a
one-week high on Monday and high-yield currencies also rose
after a weekend G20 meeting appeared to have done enough to
avert an all-out currency war and prompted investors to resume
dollar-selling.

While the meeting pledged to move towards market-determined
exchange rates and called for measures to reduce excessive
external imbalances, investors saw no reason to change their
view of a weaker dollar and stronger emerging currencies.
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By 0943 GMT, benchmark emerging stocks (.MSCIEF: ) were up 1
percent on the day to a one-week high – their biggest one-day
gain in over two weeks.

“The mood is certainly EM-positive today,” said Nigel
Rendell, emerging markets strategist at RBC Capital Markets.
“Not a great deal materialised at the G20 and people are trying
to push the dollar lower against the major as well as emerging
currencies.

“That’s leading to gains on the FX side and on the equities
side as a result.”

The dollar dropped broadly, down almost one percent against
a basket of currencies.

EM strength was also fed by a jump in oil and commodity
prices as the focus shifted back to a Federal Reserve policy
meeting on Nov. 2-3 that could result in a fresh round of U.S.
monetary stimulus.

Most emerging currencies were stronger, with the Korea’s won
(KRW=: ) and Taiwan’s dollar (TWD=: ) leading Asian gains as markets
bet they would intervene less frequently in the mmediate future.

The South African rand rose over 0.5 percent while in
central Europe, the forint (EURHUF=: ) was 0.34 percent stronger,
the Polish zloty (EURPLN=: ) added 0.3 percent and Romania’s leu
(EURRON=: ) was 0.6 percent up against the euro.

The Czech crown (EURCZK=: ) was the only laggard in central
Europe, edging some 0.1 percent lower, after the leading Czech
left-wing party secured a majority in the Senate that could
delay the government’s austerity drive.

CAPITAL CONTROL RISK

Local bourses were also on the rise, with Russian stocks
(.IRTS: ) leading the pack, up 1.46 percent, on the back of
stronger oil prices and a firmer rouble.

Czech and Hungarian shares were up 0.8 percent and 0.6
percent respectively, and South African equities gained 0.9
percent, as local miners were helped by higher metals prices for
gold and platinum.

Emerging markets have seen massive investment inflows in
recent months, prompting many countries such as Thailand and
Brazil to try to brake the stampede via various capital curbs.

Investors remain cautious over possible steps by emerging
policymakets, especially in Asia, to check their currencies via
intervention as well as measures to bar hot money inflows.

“There is still the risk of capital controls in specific
countries so people will be going for places which are not
expected to impose restrictions, such as Poland or Hungary,”
RBC’s Rendell said.

Investors are particularly keen to see if South African
Finance Minister Pravin Gordhan will unveil significant exchange
rate policy changes in his mid-term budget speech on Wednesday.
The rand is expected to trade in tight ranges until then.

Under pressure to tame a rand that has risen 6 percent this
year, Gordhan may raise the limit on foreign asset holdings of
local institutions — a possible short-term rand-negative.

Attention is also focusing on central bank meetings in
Hungary and Israel, but both countries are expected to keep
interest rates unchanged.

Israel’s six rate rises to 2 percent have pushed the shekel
to two-year highs (ILS=: ). That has forced the central bank to
intervene as investors have flocked in, lured by the prospect of
4 percent-plus growth and more policy tightening.

The currency was up 1 percent to 3.60 per dollar.

“Will (Israel central bank Governor Stanley) Fischer pull
the interest rate trigger again and normalise rates further? We
are inclined to think that after last month’s hike, a pause
could be expected,” wrote BNP Paribas analysts in a note.

On bond markets, sovereign emerging debt spreads were steady
over U.S. Treasuries (11EMJ: ) (11EML: ). Credit-default swap prices
were slightly tighter across the board, according to Markit.

The emerging new issue market remains hectic with Albania
expected to price its debut Eurobond later on Monday. Corporates
expected this week in the market include Saudi SABIC, Russia’s
Lukoil and Bank of Moscow and Kazakh bank KKB.
(Additional reporting by Sujata Rao and Sebastian Tong; editing
by Stephen Nisbet)

UPDATE 1-EMERGING MARKETS-Stocks, FX up post-G20 as dollar falls