LONDON, Sept 7 (Reuters) - Emerging equities leapt 1.7
percent on Friday and sovereign bond yield spreads fell to
14-month lows, extending gains after the ECB's message on bond
buying stoked risk appetite.
Hungary's forint however languished near five-week lows
after Budapest appeared to dash hopes of a speedy loan deal with
the International Monetary Fund.
Equities, commodities and high-yield currencies received a
shot in the arm after the European Central Bank unveiled on
Thursday a potentially unlimited bond-buying programme aimed at
lowering borrowing costs for stressed euro zone states.
MSCI's main emerging equity index traded at two-week highs
after gains of more than 1 percent on Thursday and is
on track for a weekly gain after a three-week losing streak.
Yield spreads on emerging sovereign dollar bonds
fell below 300 basis points for the first time since early July
2011. They have contracted 26 bps so far this week.
"The action announced by the ECB is offering a big comfort
to the market as it removes a major risk to the euro's
survival," said Murat Toprak, emerging markets strategist at
HSBC. "This is positive for emerging markets so we are in the
same mood as yesterday and should continue for some time."
Emerging equities were also boosted by gains in Chinese
shares which jumped 3.7 percent for their best day in
eight months. Reports of new infrastructure projects have added
to signs Beijing is acting to shore up growth.
Russian shares rose 1.3 percent after gains of 3.3
percent on Thursday, set for the best weekly performance since
June and Turkish stocks hit new 16-month highs.
Hungarian stocks too were at the highest since early May,
despite the prime minister's comments that conditions attached
to a key external aid deal were unacceptable.
Hungarian five-year credit default swaps fell 8 basis points
to 388 bps, according to Markit. The forint however slid 0.5
percent against the euro, extending losses after a sharp fall on
Thursday.
Toprak said losses were being tempered by the view Hungary
would have no choice but to ultimately accept IMF terms.
"We are used to this kind of noise from Hungary. It has an
impact on Hungarian assets in the near term but at this point
the upside to euro/forint is not as big as it's been in the past
as the global backdrop is better," he said.
(Reporting by Sujata Rao; Editing by Susan Fenton)
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