EM Assets Stage Broad Recovery as Markets Assess Renewed US-Iran Uncertainty

GLOBAL MARKET - BANGKOK. Most emerging-market stocks and currencies edged higher on Thursday as investors looked past a fresh escalation in the  Middle East, with oil prices retreating after U.S. strikes on Iran and Iranian attacks in the region failed to trigger a broader market selloff.

Although Iran attacked Kuwait and Bahrain following the U.S. strikes, oil prices fell from two-week highs touched in the previous session.

 

Risk assets in the Gulf region were mixed. Saudi Arabia and Dubai stocks slipped 0.4% and 0.1% respectively, while ones in Egypt gained 0.4%.

 

International bonds in the Gulf region stabilized, with those in Bahrain, Kuwait and Saudi Arabia flat to slightly higher on the dollar. Bonds in oil importers Sri Lanka and Kenya also edged up.

 

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"The problem now is... when a new peace deal is announced, they aren't really going to give it full credit because they don't think it's going to last," said Michael Field, chief equity strategist at Morningstar.

 

"Equally when war starts up again, people aren't going to take this as seriously either because they think a peace deal will probably be announced in the next few days... we're in a strange place."

 

MSCI's global EM stocks index edged 0.22% lower, with most declines contained by gains across regions.

 

AI-aligned stocks rebounded from their recent dip, pushing South Korea's KOSPI up 0.6%, while equities in China registered their biggest one-day jump in three months as chip stocks regained lost ground.

 

Stocks in emerging Europe also bounced back, with indexes in Romania and Hungary up about 1% each and Polish blue-chip stocks up 0.8%.

 

The South African benchmark rose 1.2%, tracking a recovery in prices of precious metals, a top export of the country.

 

On the FX front, the dollar index edged 0.05% lower. The MSCI currencies gauge was off 0.17%.

 

Most currencies were flat to marginally higher against the dollar in Asia, and South Africa's rand  appreciated 0.2%.

 

Turkey's lira was little changed, while most emerging European currencies were subdued against the euro.

 

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Hungary's forint depreciated 0.4%.

 

Separately, data showed Romania's economy shrank 1.2% on the year in the first quarter.

 

Investors assessed minutes from the Federal Reserve's June policy meeting, which showed a "few participants" said there was already a case to raise borrowing costs.

 

Bets on an interest rate hike from the U.S. central bank dwindled last week after a weaker-than-expected jobs report pointed to a stabilizing labour market.