Emerging Markets Get Boost Amid Global Tech Gains, Await Key Economic Data

Emerging markets saw gains from the global rise in tech stocks. Investors are anticipating economic data from India and evaluating inflation expectations in South Africa. The MSCI index for emerging markets rose, and news about potential Nvidia chip exports to Saudi Arabia buoyed sentiment. Currencies of key crude importers remained stable.

Emerging markets experienced a lift from broad gains in global tech-related stocks on Thursday. Investors are currently assessing a survey on inflation expectations in South Africa and are awaiting critical economic data from India. The MSCI index, which tracks developing economies, increased by 1.3%, with tech-focused indexes in Hong Kong rising nearly 1%, and those in Korea and Taiwan jumping over 2% each.

Investor sentiment improved following a report that the U.S. government is considering allowing Nvidia to export advanced chips to Saudi Arabia. Some of Nvidia's key suppliers are located in Korea and Taiwan. Despite the rise, the MSCI EM index remains close to lows seen a month ago and is on track for its first quarterly drop in a year, as concerns about global growth have dampened risk-taking ahead of a potential U.S. Federal Reserve interest rate cut expected later this month.

Shilan Shah, Deputy Chief Emerging Markets Economist at Capital Economics, stated that while the Fed's upcoming monetary easing cycle might permit some central banks to lower interest rates, decisions in emerging markets are increasingly driven by domestic factors rather than external ones. This could result in positive capital flows, especially for emerging markets with balance of payments issues, though such cases are currently rare.

Reflecting weak demand from China, the International Energy Agency reduced its 2024 oil demand growth forecast, days after OPEC revised its forecast downward for this year and next. Currencies of top crude importers Turkey and India remained stable against the dollar, whereas the Philippine peso dropped by 0.3%.

In South Asia, traders are eager for India's inflation data, expected at 1200 GMT, with predictions of slowed price growth. The main equities index grew by 1.3%, while benchmark bond yields remained steady.

South Africa's rand fell 0.5% after a central bank survey indicated that inflation expectations dropped further in the third quarter. There is anticipation that the central bank will lower borrowing costs for the first time in over four years next week. In Central and Eastern Europe, Poland's zloty decreased by 0.2%, while the Serbian dinar remained stable ahead of a local central bank interest rate decision, where a 25 basis point cut is anticipated.

Similarly, Hungary's forint declined by 0.1%. The National Bank of Hungary noted that expected rate cuts by major central banks could provide room to ease monetary conditions further in emerging markets, as indicated in the minutes from its August policy meeting. All eyes are also on the European Central Bank's upcoming monetary policy decision, with high expectations for a quarter-point reduction.

(With inputs from agencies.)