EMERGING MARKETS-Stocks rise ahead of Fed rate decision, banking fears recede

·2 min read


China, Hong Kong stocks rise for second straight session


Fed seen lifting rates by 25 bps later in the day


S.Africa consumer inflation higher than forecast in Feb


Brazil central bank meeting eyed, rates seen unchanged

By Shreyashi Sanyal

March 22 (Reuters) - Emerging market stocks rose for the second day on Wednesday, powered by a rally in Asian shares, amid hopes that the U.S. Federal Reserve could adopt a more modest interest rate hike.

The MSCI's gauge for emerging market stocks rose nearly 1%, extending gains from the previous session following a rout in global financial stocks triggered by a crash in Credit Suisse and the collapse of two large U.S. regional banks.

Focus will now swing to the Fed's decision on interest rates later in the day, where the central bank is now seen lifting its benchmark lending rate by 25 basis points (bps), as opposed to a 50 bps increase expected earlier this month.

"Every day that passes without drama is one closer to the point at which we can put the mini-banking crisis behind us," said Craig Erlam, senior market analyst at OANDA.

"This period of calm will no doubt be welcomed by the Fed and allow for it to continue hiking by 25 basis points without much controversy."

In Asia, China and Hong Kong stocks rallied for a second day. Turkish stocks rose 0.7%, while South African equities added 0.9%.

Turkish state lenders Halkbank and Vakifbank said that they will issue shares to raise their capital by 30 billion lira ($1.58 billion) and 32 billion lira ($1.68 billion), respectively. Shares of both companies rose over 1% each.

Most currencies in the developing world traded in a narrow range, with the emerging market currency index flat against a muted dollar ahead of the Fed's decision.

South Africa's rand rose 0.2% after data showed the country's headline consumer inflation rose slightly higher than expected to 7% year-on-year in February from 6.9% in January.

Sri Lanka's President Ranil Wickremesinghe said the next round of talks with creditors will start in the third week of April, adding that the debt-stricken nation has started to receive funds from the International Monetary Fund.

Central and eastern European currencies fell against a stronger euro.

Brazil's central bank is also expected to announce its policy decision later in the day, likely leaving the Selic rate unchanged at 13.75% for the fifth straight meeting.

For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX

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For RUSSIAN market report, see (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Varun H K)