Emerging market equities halted its six-day bearish streak following China’s announcement to replace existing benchmark lending rate with a more market-driven rate system in a bid to make borrowing cheaper.
A gauge of emerging market equities gained a slim 0.7 percent to close at 970.27 index points Monday.
This came after EM assets was battered by a renewed trade war between world’s two economic bigwigs, United States and China, which saw investors pulled out over $5 billion.
The new policy is meant to improve the mechanism used to establish the loan prime rate, in a move to further ease real interest rates as part of the country’s broader market reforms.
Analysts say EM stocks will maintain a bullish tempo in near term as the new policy provides respite to investors that developed markets will use stimulus measure to spur global growth.
Meanwhile, the Lagos equity index closed on a positive note Monday after a four-day losing streak, gaining 0.71 percent. But year-to-date performance of some 14 percent puts the Nigerian bourse among the worst performers globally.
MTN Nigeria led the pack of advancers Monday after a 2.74 percent gain to N135/share, unseating West Africa’s biggest cement maker, Dangote Cement, as the most-capitalized stock on the Nigerian Exchange.
Not until the fiscal authorities come up with bold policy reforms that are deemed friendly to investors, the Nigerian equity market might bleed further, analysts have said.
Financial markets across the globe saw a horrendous early August as fears that the protracted trade battle will drive the global economy into recession, triggered a flight from risky assets such as stocks and developing markets.
Portfolio flows to the said market halved to $24.3 billion in July from its 5-month high of $40.9 billion in June. Stocks received the hotter blow as it plunged 91 percent last month compared with bond flows that shed 19 percent.
Meanwhile, currencies were largely mixed, with rising oil prices after an attack on a Saudi oil facility by Yemeni separists adding pressure. MSCI currency index ended Monday’s trade with 0.05 percent gain.
The World Bank has said that investment growth in the said market will slow to 3.9 percent by 2019-end from 4.2 percent in 2018, citing weak global growth, structural lapses and escalating debt levels as headwinds to EM’s investment prospect.
Israel Odubola
