LONDON, Feb 13 (Reuters) - Rekindled risk appetite helped emerging stocks to a second day of healthy gains on Tuesday while South African stocks jumped after the ruling ANC party decided to remove President Jacob Zuma as head of state.
Following the lead of U.S. stock markets overnight, MSCI's emerging market index rose 0.8 percent with bourses from Turkey and Russia to emerging Europe trading stronger.
Chinese stocks put in a stellar session, with mainland and Hong Kong indexes closing more than 1 percent higher. An additional lift from data showed China's banks had extended a record 2.9 trillion yuan in new loans in January – nearly five times the December total and well above expectations.
The loans are expected to support growth in the world's second largest economy, but may also underpin liquidity globally as major Western central banks begin to withdraw stimulus. And Beijing's central bank governor pledged the country will maintain appropriate credit growth.
Global markets have suffered over the past week as concerns about higher bond yields and interest rates in developed economies spurred recent selling of equities.
"I think the worst is over – we have had very large outflows from retail-focused funds – both equity and debt," said Koon Chow at UBP.
"Institutional investors ... take a longer term view in terms of asset allocation and look at the yields emerging markets could give relative to developed markets."
In South Africa, stocks were also on a tear with the main index up 1.4 percent in the best daily gain in nearly two months. However, the country's stocks have underperformed wider emerging markets since the start of the year amid the ongoing political wrangling over the country's presidency.
Following a marathon meeting capping weeks of political stalemate and intrigue, South Africa's ruling ANC party decided overnight to remove President Jacob Zuma. It is unclear if Zuma - who has resisted calls to step down so far - will accept the decision or force the ANC to unseat him through parliament.
"It seems unlikely he will say he will leave today, if he said 'no' yesterday," said UBP's Chow, adding the process had shone a positive light on legal and political institutions in the continent's most industrialised economy.
"An official process to remove him speaks more positively about how the ANC operates than some backroom deal, which might involve him resigning in exchange for some kind of promise of a presidential pardon," he said.
However, the rand did weaken against the dollar, edging 0.3 percent lower though the currency has strengthened more than 1 percent in each of the last two sessions.
Currencies elsewhere were broadly treading water although the dollar index extended modest losses it had suffered overnight. For GRAPHIC on emerging market FX performance 2018, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see tmsnrt.rs/2dZbdP5
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For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1162.80 +9.43 +0.82 +0.38
Czech Rep 1113.08 +2.59 +0.23 +3.24
Poland 2419.11 +4.70 +0.19 -1.71
Hungary 38572.53 +285.31 +0.75 -2.04
Romania 8143.05 +33.56 +0.41 +5.02
Greece 816.87 -6.59 -0.80 +1.81
Russia 1217.14 +10.92 +0.91 +5.43
South Africa 50402.81 +858.49 +1.73 -4.06
Turkey 15362.07 +540.47 +0.47 +0.03
China 3185.60 +31.47 +1.00 -3.68
India 34300.47 +294.71 +0.87 +0.72
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.39 25.37 -0.07 +0.54
Poland 4.18 4.17 -0.20 +0.00
Hungary 311.62 311.77 +0.05 -0.35
Romania 4.66 4.65 -0.08 +0.46
Serbia 118.25 118.24 -0.01 +0.13
Russia 57.82 57.74 -0.13 -0.28
Kazakhstan 323.31 325.46 +0.66 +2.94
Ukraine 26.67 26.80 +0.49 +5.53
South Africa 11.92 11.89 -0.26 +3.69
Kenya 101.05 101.00 -0.05 +2.03
Israel 3.52 3.52 -0.02 -1.19
Turkey 3.80 3.80 -0.13 -0.35
China 6.34 6.33 -0.29 +2.57
India 64.27 64.27 +0.00 -0.68
Brazil 3.29 3.29 +0.00 +0.52
Mexico 18.62 18.59 -0.13 +5.54
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 318 1 .05 7 87.08 1
Reporting and graphic by Karin Strohecker; Additional reporting by Claire Milhench; Editing by Matthew Mpoke Bigg