Emerging markets showed signs of resilience Monday as investors assessed the extent of the banking turmoil, with currencies like the Hungarian forint rebounding and volatility easing.
(Bloomberg) — Emerging markets showed signs of resilience Monday as investors assessed the extent of the banking turmoil, with currencies like the Hungarian forint rebounding and volatility easing.
A gauge of developing-nation equities trimmed losses, while South African stocks had their best day since November. Meanwhile, the forint joined currencies including the Mexican peso in reversing losses as sentiment improved. Authorities have been trying to contain a crisis in the banking sector, moving to boost US dollar liquidity on Sunday and helping broker Credit Suisse Group AG’s sale to UBS Group AG.
The CBOE Emerging-Market ETF Volatility Index, the VIX equivalent for developing-nation shares, reversed gains after soaring at the open. Some of the largest US-listed exchange-traded funds that track emerging-world stocks and bonds also climbed.
Traders are monitoring whether the banking woes will prompt a less aggressive stance from central bankers. Some economists see a growing case for the Federal Reserve to pause its policy-tightening campaign when it announces its next rates decision Wednesday. While developing-economy stocks stabilized Monday, they’re still near the lowest in months.
Emerging markets are “in a tricky spot right now,” but if the Fed keeps rates steady, that can be a positive, said Brendan McKenna, a strategist at Wells Fargo & Co. “And if policymakers do contain banking stresses EM can perform well longer-term.”
The banking turmoil helped accelerate outflows from emerging markets last week. Traders pulled about $1.9 billion from exchange-traded funds that invest in developing-nation stocks and bonds in the week ended March 17, the biggest weekly withdrawal in over a year. Outflows from emerging-market, hard-currency bonds have also picked up.
–With assistance from Zijia Song.
(Updates market moves throughout.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.