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EMERGING MARKETS-Rand jumps on Zuma court ruling; MSCI index at 6-year high

From Reuters - October 13, 2017

LONDON, Oct 13 (Reuters) - The South African rand jumped to two-week highs on Friday after a court ruling that upheld reinstating corruption charges against unpopular President Jacob Zuma, while the rally on broader emerging markets continued.

MSCIs emerging equity index inched to new six-year highs on back of encouraging Chinese trade data, record high world shares and a further fall in U.S. yields, while a flat dollar encouraged emerging currencies higher on the day.

JPMorgans ELMI Plus currency index closed Thursday at a three-week high and local debt yields slipped 3 basis points on average over the week, to hover just above the 6 percent mark.

The South African rand firmed almost 1 percent, thanks to a Supreme Court decision to uphold a High Court ruling that reinstated graft charges against Zuma. Bond yields slipped to a one-week low.

Im not surprised the market has taken it positively, but the issue is really who is going to take over from (Zuma) at the end of the year. Whether or not he gets his just desserts is a side issue, said Paul Fage, senior emerging markets strategist at TDSecurities.

He was referring to the ruling African National Congresss December conference at which Zuma will be replaced.

The emerging markets rally is down to this weeks dollar retreat - the greenback has lost 0.8 percent this week against a basket of currencies - but the party could be scuppered if data due later in the day reveals a pick-up in U.S. inflation.

On the other hand, data earlier on Friday showed strong growth in Chinese exports and imports - crucial ahead of next weeks 19th Communist Party Congress.

That helped the yuan to three-week highs, putting it on track for a weekly 1 percent gain versus the dollar. That in turn lifted other Asian currencies, especially after Singaporean data reinforced the picture of robust growth across the developing world

Morgan Stanley analysts told clients they remained bullish on emerging markets, adding: We remain of the view that EM currencies will be resilient in the face of gradual moves higher in U.S. yields, considering the strong growth momentum and valuation support many emerging markets.

One of the exceptions to this weeks emerging market rally is Turkey, which is involved in a visa dispute with the United States. The lira rose slightly on the day but is set for a fifth week of losses.

Although the visa row seems to be ebbing, Morgan Stanley wrote: We stick with our dislike stance on lira.

Investors are also closely watching Mexican markets, which could suffer hefty losses should talks on renegotiating the NAFTA free-trade deal fail. Sources with knowledge of the talks called the atmosphere horrible, with Mexico saying it is already working on a Plan B.

The peso is trading near five-month lows and Mexican stocks have fallen 0.7 percent on the week so far

For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters EquitiesLatestNet Chg% Chg% Chg

on year

Morgan Stanley Emrg Mkt Indx1123.97+2.35+0.21+30.35

Czech Rep1053.05-1.83-0.17+14.26

Poland2533.38-4.31-0.17+30.06

Hungary38614.23-157.85-0.41+20.66

Romania8030.90+33.68+0.42+13.35

Greece758.19+6.84+0.91+17.80

Russia1147.72+3.76+0.33-0.40

South Africa51331.89-20.93-0.04+16.92

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