Bull run thunders on as Russia stocks hit record high

By Marc Jones

LONDON (Reuters) - A thundering bull run in emerging markets had investors polishing their horns on Tuesday as record high Russian stocks and a two-year peak in Brazil echoed broad EM FX and bond gains.

MSCI's closely-followed 27-country EM share index ground out its latest one-year high as it climbed for a seventh day in nine, and its rally since January moved past the 33 percent marker.

Moscow's rouble-denominated MICEX stock market underscored the power of the uplift as oil creeping back towards $50 a barrel [O/R] helped it shrug off fighting in Ukraine to hit an all-time high.

EM currencies meanwhile took advantage of a dollar heavily subdued by fresh signs that U.S. interest rates are likely to stay put this year.

 

The greenback was having its worst day of the month, which allowed South Korea's won > to press a 15-month high, Brazil's real > to touch a one-year high and Mexico's peso > to climb to its highest since May, among others.

"It's summer, it's quiet and the market is rallying these are the important things," said Aberdeen Asset Management's Viktor Szabo.

"We are basically now waiting for a wall of (bond) issuance in early September and you have to say the environment is perfect," he said, adding that major players like Saudi Arabia and Russia may all be looking to sell debt.

Russia's Finance Ministry will decide in the autumn whether to top up sovereign Eurobond issue, Konstantin Vyshkovsky, head of the ministry's debt department, told Reuters.

Among the other few pieces of hard news, Zambia's currency, the kwacha >, rose 2.5 percent to 10.06 against the dollar after President Edgar Lungu narrowly won re-election on Monday, though his main rival warned the vote had been rigged.

Zambia is Africa's second biggest copper producer but the kwacha slid around 20 percent between April and July, and Lusaka has been in talks about a support deal with the International Monetary Fund.

"We had Lungu winning but as always there will be an appeal from the opposition," said Aberdeen's Szabo. "The problem is with any contested election; if they become really close, you can have some noise."

There was reassuring news for big central European economies like Poland, the Czech Republic and Hungary, meanwhile, as investor morale in Germany, their biggest export partner, picked up slightly after taking a hit by Britain's June Brexit vote.

The Czech economy also grew a touch faster between April and June than had been forecast, Prague said, expanding 0.9 percent in the second quarter and 2.5 percent year-on-year.

"Economic sentiment is recovering somewhat from the Brexit shock," German ZEW President Achim Wambach said. "Political risks within and outside the European Union, however, continue to inhibit a more optimistic economic outlook for Germany."

Turkish stocks <.XU100> drifted lower after reports that Turkish police had simultaneously raided 44 companies in Istanbul and had warrants to detain 120 company executives as part of the investigation into last month's attempted military coup.

Since the coup, more than 35,000 people have been detained, of whom 17,000 have been placed under formal arrest, and tens of thousands more suspended in a purge of Turkey's military, law-and-order, education and justice systems.

The Turkish lira > was at a post-coup attempt high of 2.993 per dollar.

Emerging Markets Prices from

Reuters

Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley

Emrg Mkt Indx <.MSCIEF> 918.13 +2.27 +0.25 +15.61

Czech Rep <.PX> 859.65 -1.65 -0.19 -10.11

Poland <.WIG20> 1847.54 -10.16 -0.55 -0.62

Hungary <.BUX> 27696.46 -172.33 -0.62 +15.78

Romania <.BETI> 6845.59 +56.54 +0.83 -2.27

Greece <.ATG> 574.05 -2.07 -0.36 -9.08

Russia <.IRTS> 986.09 +13.99 +1.44 +30.26

South Africa

45766.39 +462.51 +1.02

-0.07

Turkey <.XU100> 78200.21 -272.35 -0.35 +9.02

China <.SSEC> 3110.48 -14.72 -0.47 -12.11

India <.BSESN> 28071.92 -80.48 -0.29 +7.48

For GRAPHIC on emerging market FX performance 2016, see http://link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2016, see http://link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2016, see http://link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2016, see http://link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see [CEE/]

For TURKISH market report, see [.IS]

For RUSSIAN market report, see [RU/RUB])

(Editing by Mark Heinrich)