EM stocks fall on trade deal doubts; Lira firms on central bank comments

BENGALURU (Nov 29): Emerging markets stocks fell on Friday on worries that a new US law backing Hong Kong protesters could hinder progress in resolving the Sino-US trade war, while comments from the Turkish central bank breathed new life into the lira.

MSCI's stock index for emerging markets fell nearly 1%, extending losses to the second straight session after US President Donald Trump signed into law on Wednesday legislation that supported the protesters, a move that China said it would retaliate against.

"Market sentiment is likely to remain fragile, as China has already threatened retaliation measures in reaction to the bill being passed," said Thu Lan Nguyen, FX strategist at Commerzbank. "There is still the risk of a set-back in the short term."

Hong Kong stocks led declines among Asian shares as caution prevailed on the trade front, while pro-democracy protesters geared up for more rallies over the weekend.

The Turkish lira strengthened after the central bank said credit growth is expected to become widespread as a result of its required reserves framework, as well as favourable economic conditions.

"Turkey's central bank is right now pursuing an expansionary policy, so the focus still remains on revamping credit growth," said Cristian Maggio, head of emerging markets strategy at TD Securities.

South Africa's rand also firmed against the US dollar on Friday ahead of trade and monthly government budget balance figures due later in the session.

Central bank data showed growth in South Africa's private sector credit quickened in October from the previous month.

Forex trading has turned risk-averse in the recent few weeks as relatively strong economic indicators out of the United States boosted the US dollar. MSCI's index for emerging-markets currencies is now on track to fall for its third week in a row.

The Hungarian, Polish and Czech currencies were trading sideways against the euro.