Emerging markets swing amid political volatility

Bloomberg

Emerging-market stocks swung between gains and losses as investors assessed prospects for global growth and political risks.
Equity benchmarks in Hong Kong and India fell at least 0.5 percent, while shares in Brazil gained for a second day before a Senate vote on impeaching the president. In Turkey, the lira fell for a fourth day amid signs President Recep Tayyip Erdogan is tightening his grip on power. 1Malaysia Development Bhd.’s dollar bonds due May 2022 rose after Abu Dhabi’s sovereign wealth fund, which guarantees some of the Malaysian fund’s notes, paid interest due on Wednesday.
Emerging markets have trimmed this year’s gains in May as US jobs data and Chinese economic figures add to evidence that growth remains subdued. While markets have rallied on the outlook for political change in Brazil and the Philippines, events in Turkey and Poland, which faces a rating review from Moody’s Investors Service on May 13, have weighed on local assets.
“There is no clear direction in the market as investors continue to digest U.S. payrolls,” said Guillaume Tresca, a senior emerging market-strategist at Credit Agricole CIB in Paris. The situations in countries such as Turkey and Poland “have turned sour recently,” he said. “We expect Moody’s to downgrade Poland on Friday.”

Pimco’s Holdings
Pacific Investment Management Co’s Total Return Fund is reducing its holdings of developing-nation debt on speculation the Federal Reserve is still on course to raise interest rates. The fund cut its holdings of emerging-market debt to the lowest level in almost two years in April, based on data from the Pimco website.
The MSCI Emerging Markets Index rose 0.3 percent to 809.34 as of 11:17 am in New York, after dropping as much as 0.3 percent. The gauge’s 3.7 percent decline in May has trimmed this year’s gain to 1.9 percent and left it trading at 11.4 times the 12-month estimated earnings. The MSCI World Index of developed countries trades at a multiple of 15.9 and has slipped 0.2 percent in 2016.
The Ibovespa added 0.5 percent in Sao Paulo. The Brazilian benchmark extend Tuesday’s 4.1 percent gain before a vote that could force President Dilma Rousseff out of office and into an impeachment trial.

Philippines, China
The Philippine Stock Exchange Index surged 3.1 percent, extending Tuesday’s 2.6 percent rally, after Rodrigo Duterte, a tough-talking mayor of Davao city, won Monday’s presidential vote.
Chinese stocks in Hong Kong resumed declines as financial companies slumped amid speculation the central government will refrain from adding stimulus even as the economy slows.