January 22, 2018 / 10:08 AM / 3 months ago

EMERGING MARKETS-Rand at 2 1/2-yr highs, emerging stocks extend gains

LONDON, Jan 22 (Reuters) - South Africa’s rand rose to its highest in more than two years on Monday amid growing expectations that scandal-tarnished President Jacob Zuma would soon be ousted, while emerging-market equities pushed to another near-decade high.

The rand gained around 1 percent against the dollar to trade at its best levels since June 2015, following reports that the ruling African National Congress (ANC) party plans to force Zuma to step down.

The rand has strengthened by about 12 percent since the election of businessman Cyril Ramaphosa as ANC leader in December, with investors warming to his promises to root out corruption and boost the economy.

“South Africa has a couple of things going for it which remind me of Brazil two years ago,” said Kiran Kowshik, a strategist at UniCredit. Those include improving external balances, a shrinking current account deficit, high real yields and hopes of reform under Ramaphosa, he said.

“The momentum behind the reform expectations is very strong and will continue to support the rand. I don’t think it’s a big deal if it goes to 11.70 per dollar. The support is there for the currency,” Kowshik said.

In another promising sign, Ramaphosa appointed a new board at state-owned power utility Eskom at the weekend. Eskom has been in a leadership crisis after several board members resigned in 2017 amid growing governance concerns.

South African bank stocks rallied hard, up 2 percent and the broader index rose 0.3 percent.

Shares of troubled South African retailer Steinhoff also jumped 10.6 percent after it announced a plan to sell $620 million of stock in investment firm PSG Group as it scrambles to plug a liquidity gap.

MSCI’s emerging equity index rose 0.4 percent, underpinned by accelerating world economic growth. Equity markets are shrugging off the shutdown of the U.S. government, after the Senate failed to reach a compromise on funding it .

“EM equities owe (their) strong performance to rising earnings,” analysts at Goldman Sachs said it a note, adding that valuations had “significant room to improve” based on improving economic fundamentals and the rosier earnings outlook.

Chinese blue-chip stocks rose to 31-month highs.

In emerging Europe, Russian shares rose 0.7 percent, approaching Friday’s record highs, as oil prices held near $69 a barrel.

But the lira weakened 0.3 percent after Turkey launched a military operation at the weekend against a U.S.-backed Kurdish militia in Syria. The move threatens to further strain Turkey’s ties with the United States.

The Romanian leu underperformed regional peers, trading at its weakest year-to-date against the euro. Tens of thousands of Romanians marched in Bucharest on Saturday to protest corruption and attempts by the ruling Social Democrats to weaken judicial independence.

For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 1237.72 +5.12 +0.42 +6.84

Czech Rep 1125.26 +1.64 +0.15 +4.37

Poland 2602.83 +1.01 +0.04 +5.75

Hungary 40212.49 +190.60 +0.48 +2.12

Romania 8355.16 -6.79 -0.08 +7.76

Greece 852.65 +5.09 +0.60 +6.27

Russia 1281.96 +11.04 +0.87 +11.05

South Africa 54275.29 +216.55 +0.40 +3.32

Turkey 15438.87 +291.81 +0.25 +0.09

China 3501.36 +13.50 +0.39 +5.87

India 35691.91 +180.33 +0.51 +4.80

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2018

Czech Rep 25.39 25.38 -0.05 +0.52

Poland 4.17 4.17 +0.07 +0.16

Hungary 309.25 309.07 -0.06 +0.41

Romania 4.67 4.66 -0.14 +0.26

Serbia 118.49 118.35 -0.12 -0.08

Russia 56.55 56.68 +0.23 +1.96

Kazakhstan 323.96 324.70 +0.23 +2.73

Ukraine 28.87 28.86 -0.03 -2.51

South Africa 12.06 12.18 +0.96 +2.45

Kenya 102.75 102.70 -0.05 +0.34

Israel 3.42 3.41 -0.22 +1.62

Turkey 3.81 3.81 -0.24 -0.66

China 6.40 6.40 -0.04 +1.63

India 63.74 63.82 +0.13 +0.14

Brazil 3.20 3.20 +0.00 +3.63

Mexico 18.60 18.61 +0.03 +5.63

Debt Index Strip Spd Chg %Rtn Index

Sov’gn Debt EMBIG 295 0 .00 8 06.17 1

Reporting by Claire Milhench; additional reporting by Sujata Rao, editing by Larry King

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