EMERGING MARKETS-Emerging stocks, FX gain; S.Africa chooses Zuma successor

From Reuters - December 18, 2017

LONDON, Dec 18 (Reuters) - Hope for progress on U.S. tax reform and higher crude prices helped emerging markets make a cheerful start on Monday with much focus on South Africas knife-edge leadership battle, which will set policy direction for Africas most industrialised nation.

MSCIs emerging market index advanced 0.5 percent thanks to solid gains in Asia, with the benchmark having now risen 30 percent since the start of the year.

The good mood mirrored moves on major bourses, where sentiment was boosted by expectations that U.S. lawmakers will pass a long-awaited tax bill this week in a move that could lift corporate profits, trigger share buybacks and raise dividend payouts. Firmer oil prices also lent some support.

But the spotlight was firmly on South Africa where the rand strengthened 0.8 percent as delegates of the ruling ANC were chosing their new party leaderand likely next president of the country.

The race, which is too close to call, pitches Deputy President Cyril Ramaphosa against President Jacob Zumas ex-wife Nkosazana Dlamini-Zuma with results due later in the day.

Hopes that Ramaphosaseen as business friendly - could win the contest have lifted the rand some 7 percent in the past four weeks against the dollar, making it one of the best performing emerging currencies in recent weeks.

(Markets) want to see reforms happening - without reforms there is no point investing, said Simon Quijano-Evans, emerging markets strategist at Legal & General Investment Management.

The rand can rally further if (Ramaphosa) wins, based on the comments he comes out withit would solidify the rally. (If he doesnt win), there would be an initial sell off in the randthen we need to see what any new leadership would come out with - but it would be a big disappointment.

Yields in South Africas local benchmark sovereign bonds briefly dipped below 9 percent - their lowest level since the start of November.

Meanwhile in India, markets were breathing a sigh of relief after the ruling BJP party was set to win an election in Prime Minster Narendra Modis home state on Monday following a tight race, albeit with a reduced margin.

The outcome was seen as confirming that Modis popularity is intact, with stocks gaining 0.6 percent while the rupee traded a touch stronger against the dollar.

Currencies elsewhere also chalked up gains, with Russias rouble 0.4 percent stronger while Turkeys lira gained 0.2 percent.

Data out of China showed that growth in new home prices kept up momentum in November thanks to gains in provincial centres and smaller cities, though this signalled policy-makers may need to step up curbs to rein in speculation amid fears of a property bubble.

In emerging Europe, Serbias dinar strengthened a touch against the euro after the country enjoyed a sovereign ratings upgrade late on Friday by both S&P Global Ratings and Fitch. Both agencies now rank the country at BB - the second highest non-investment grade rating.

S&P said the upgrade reflected the countrys strong fiscal position and steady economic recovery.

For GRAPHIC on emerging market FX performance 2017, see For GRAPHIC on MSCI emerging index performance 2017, see

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

on year

Morgan Stanley Emrg Mkt Indx1123.81+5.31+0.47+30.33

Czech Rep1065.41+3.36+0.32+15.60







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