Emerging market stocks hit near six-week top on China stimulus signals

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BENGALURU (Jan 15): Emerging market stocks rose on Tuesday, helped by Chinese shares clocking their best day in a week and a half on signs of more stimulus, while developing world currencies broadly firmed against a soft dollar ahead of Britain's parliamentary vote on Brexit.

Chinese shares gained as Beijing signalled more stimulus to bolster the world's second largest economy, a day after weaker-than-expected monthly trade data prompted deeper fears about the toll a bruising trade war with the United States was exacting.

Concerns about slowing global growth raised expectations of a pause in US Federal Reserve rate hikes, weakening the dollar in the run-up to the parliamentary vote on Prime Minister Theresa May's European Union divorce deal.

MSCI's developing world stocks benchmark rose 1.1% and was near a six-week peak, pushed up by gains in index heavyweights China, South Korea and Taiwan, which all ended at least 1% higher.

China's yuan firmed in the onshore market, with a vice governor of the People's Bank of China saying authorities are confident of keeping the yuan rate stable despite cuts to banks reserves, a message markets found credible.

China has shown in the past that "if they have a policy, they will stick by it even if it involves running down some of their foreign exchange reserves", said Gareth Leather, a senior economist with Capital Economics.

Turkey's lira softened 0.4%. Unemployment in the country ticked up to 11.6% in the September-November period from the August-October period, data on Tuesday showed.

South African stocks were on pace for their highest closing level in more than two months. Internet group Naspers Ltd notched a 0.6% gain, as Tencent Holdings Ltd rose 2.6%.

Naspers holds a stake of about 31.1% in the Chinese internet giant, according to Refinitiv Eikon data.

The rand weakened on technical factors as the dollar-rand pair started trade in close proximity to the 200-day moving average, after which bullish technicals traders pushed the pair up as much as 0.4%.

Russia's rouble was little changed with the central bank was set to resume foreign exchange purchases after a five-month hiatus. Higher oil prices helped Russian stocks rise 0.6%.

Emerging European currencies such as Hungary's forint, Poland's zloty and Romania's leu traded marginally firmer against the euro ahead of the Brexit vote.

A rally in emerging market local currency government bonds saw the yield on JP Morgan's GBI-EM index hit its lowest level since May.

The index, which effectively aggregates developing world governments' borrowing costs, saw its yield drop to 6.394% having stood at almost 6.7% in mid-December.