The news arriving from Washington has brought oxygen back to the emerging countries. Markets hit three-month highs, bonds rallied and currencies rallied after Lawrence Summers pulled out of the Federal Reserve chairman race and the US agreed to the Russia in a plan for the dismantling of the Syrian chemical arsenal.
The MSCI emerging markets index rose 1,4% to 1000,42 points in London this morning, hitting its highest level since June 4. Stock indices in the Philippines, Thailand, Turkey and Indonesia rose by at least 2%. The yield on Indonesia's 10-year debt fell 29 basis points to 8,07%. The South Korean won strengthened to a six-month peak, while the Turkish lira rose 1,6% against the dollar.
Summers, a former US Treasury secretary, would have tightened the ropes on Fed policy more than Janet Yellen, the main candidate for Ben Bernanke's succession. Meanwhile, capital outflows of more than $47 billion hit emerging market funds between August and May amid fears that a reduction in Fed stimulus policy would erode demand for risky assets.
“Having Summers out of the picture is good for markets,” Peter Elston, head of Asia-Pacific strategy at Aberdeen Asset Management, which manages approximately $318 billion, told Bloomberg. “The announcement – he added – is positive for flows in the region”.
