With most markets closed for Easter, the MSCI emerging markets index rose on Friday, taking its weekly advance to 2.2%. Currencies of commodity-linked countries including South Africa outperformed this week, sending the benchmark near a six-month high.
Developing-nation assets are steadying from a three-week selloff driven by tit-for-tat tariff escalations between the US and China and fears of a potential US recession. Markets remain nervous as Trump’s frequent pivots between threats and exemptions have left valuations vulnerable to headline-induced volatility. Some investors are turning attention to non-tariff themes such as valuations and China’s consumer demand.
“We obviously don’t know what will happen next,” said Sammy Suzuki, the head of emerging-market equities at AllianceBernstein. “However, we should be thinking about both the possibility of intensification as well as thawing. Are there companies that can succeed in either scenario? I believe that ultimately investors should focus on fundamentals and valuation.”
Friday’s trading also benefitted from Trump comment that he was reluctant to continue ratcheting up tariffs on China because it could stall trade between the two countries. The MSCI equity gauge has recouped more than half of the losses it incurred in late March and early April, driving most of its strength from Chinese and Indian stocks.
While Hong Kong and Mumbai were shut on Friday, the Shanghai market was open: the main gauge there traded little changed to end with a weekly advance. Non-Chinese Asian shipping stocks extended a rally after the US proposed fees on Chinese ships docking at US ports.Overall EM volumes dwindled as most markets were closed for Good Friday. As of 9:42 a.m. London time, the total number of shares traded on the gauge was 95% below the 30-day average.The currency market, too, witnessed small moves. The main EM benchmark fell less than 0.1% on Friday, but was on course for a weekly increase. Carry traders reported profits for a fourth successive week, their longest winning streak since January 2023.
Turkey’s central bank reopened one-week repo auctions a day after delivering a surprise rate hike. The country’s 10-year sovereign yield eased for a second day, shedding 43 basis points on Friday. Morgan Stanley said it is “cautiously” re-entering the lira carry trade.
