The month-end optimism echoed in everything from a tech-stock rally in Hong Kong to firmer iron ore prices in Singapore and a stronger South African rand. Beyond the China-themed assets however, markets were muted with currencies trading within a range and stocks paring gains. Idiosyncratic stories came to the fore with investors watching Turkish assets for the impact of last week’s interest-rate hike and Hungary on its upcoming decision.
Despite a rebound, emerging-market equities are heading for the worst August since 2015, the year traders remember for an unexpected devaluation of the yuan that sparked global panic. This time, China is using some of the tricks from the same playbook it used then: authorities asked mutual funds not to become net sellers of stocks after a selloff erased $1 trillion from shareholder wealth. Such moves didn’t help eight years ago and some traders speculate they won’t now.
Continuing hopes for stimulus from China are helping investors to take advantage of cheaper valuations that resulted from this month’s selloff. Emerging-market stocks trade at a forward price-earnings ratio of 11.8 times, below their five-year average of 12.3. The yield sovereign dollar bonds reached the highest since November on Aug. 21 and has been easing since.
Meanwhile, economists surveyed by Bloomberg reduced their forecast for growth this year in the world’s second-biggest economy, to 5.1% from 5.2% seen earlier.
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