Emerging market stocks and currencies are maintaining stability as investors await global inflation data and the South African elections.
Emerging markets are navigating cautiously in anticipation of critical forthcoming events. In South Africa, the rand has strengthened for the third consecutive day, trading at 18.39 per dollar. This appreciation is attributed to optimism surrounding the African National Congress’s (ANC) recent reforms aimed at alleviating electricity and transit bottlenecks. Investors are particularly focused on the upcoming South African elections, where the ANC is projected to secure approximately 45% of the vote and potentially form a coalition with smaller parties. Furthermore, the South African Reserve Bank is set to meet on 30 May. Analysts are sceptical about a potential interest rate cut despite April’s declining inflation rate. On a global scale, developing market currencies have edged higher against the dollar as the US core personal consumption expenditures report looms, driven by expectations of potential Federal Reserve rate cuts.
For investors, this period represents a calm before a potential storm. There is a prevailing sense of caution as pivotal global inflation data and regional elections draw near. An index of emerging market currencies is poised for monthly gains, with the dollar experiencing downward pressure. However, the emerging market equities index dipped by 0.1% due to underperformance in Shanghai, despite China’s recent stimulus measures. Nonetheless, optimism persists as experts observe that China’s economic outlook appears promising after reaching a nadir.
Looking beyond the immediate events, significant developments are taking place in various regions. Zambia is on the verge of exiting a prolonged default, having secured a $1.3 billion loan from the International Monetary Fund, contingent on debt restructuring. Additionally, the International Finance Corporation has launched a $4 billion platform to support small businesses in developing markets. In Thailand, the Cabinet has approved the 2024 budget, which includes a $13.7 billion handout. Meanwhile, India’s Adani Enterprises has announced ambitious plans to raise up to $2 billion, underscoring the region’s commitment to growth and stability.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
