Following a somewhat difficult year for Emerging Markets (EM), equities and indices in the EM space had a bit of relief on Tuesday as they rose on the back of the possibility that China would need to increase infrastructure spending so as to offset the most recent tariffs imposed by the US on Chinese imported goods – the US current 10% tariffs on 200 billion of Chinese imports would look to be increased to 25% by year end – the MSCI emerging market index increased by 0.2% (see chart below).
This optimism is largely anchored around the possibility that the Chinese would expectedly cushion the effect of current trade escalation by further implementing easing policies. On that note, the Hong Kong 50 index pushed upwards by 2.5%; emerging equities in Europe rose by 1.2% and 0.4% in Poland and Moscow respectively. In Africa, the Nigerian All-Share Index rose by 0.56% on Tuesday.
Although it might be too early to infer, there is a wide range of expectation that the EM depreciation is nearly close to bottoming out. As market participants are coming to a place of comfort as regards the Sino-US trade war – anticipating that damages would be curtailed compared to what was earlier feared. That is, risk-on sentiment would be seen to build up following envisaged dollar weakness.
To trade the global markets, visit and open up a live account here
This article was contributed by Eagle Global Markets (EGM).
