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EMERGING MARKETS-Emerging market stocks gain on China data; Latam dips

Asher Levine and Sujata Rao
Wednesday, 12 Feb 2014 | 3:13 PM ET

RIO DE JANEIRO/LONDON, Feb 12 (Reuters) - Emerging market stocks rose to three-week highs on Wednesday, boosted by stronger-than-expected trade data in China, but Brazil and Mexico shares were unable to hold on to early gains.

China's January exports and import growth readings easily beat forecasts, data showed on Wednesday, easing concerns of a slowdown in the world's second-largest economy. China is a key purchaser of raw materials such as iron ore, soybeans and copper from other developing markets.

"Surprisingly strong export growth from China last month has raised hopes of a broader recovery in emerging market exports," Capital Economic wrote in a note to investors.

Global emerging market equities advanced nearly 1 percent though the MSCI Latin American stock index dropped into negative territory late in the session.

Mexico's IPC index lost about 0.3 percent as traders took profits on shares of heavily-weighted telecommunications firm America Movil, after they soared by the most in over two months in the previous session.

America Movil, which beat quarterly profit estimates late on Tuesday, said on Wednesday it is unsure if it will sell more shares in Dutch telecoms group KPN.

Mexico's peso traded about 0.2 percent weaker against the dollar following the central bank's inflation report on Wednesday.

The bank said the inflation outlook for 2014 would be higher than previously forecast, but policymakers said price pressures would cool by the end of the year. It also maintained its growth forecast for 2014 at between 3 percent and 4 percent.

"As much as we like the Mexican story, data has been coming very soft and calls into question the central bank's scenario for a stronger recovery this year," Brown Brothers Harriman strategists wrote earlier on Wednesday.

Brazil's benchmark Bovespa index, which tends to track the outlook for China growth, retreated 0.5 percent, turning lower after a 1.6 percent rally in the previous session.

Brazilian shares advanced in the three of the four past sessions. But underlying confidence in the local market has remained low due to a weak outlook for domestic economic growth, with gains typically short-lived.

"Yesterday the index rose quite a bit without a very strong driver and today we saw a correction, even with stronger China numbers," said Luiz Roberto Monteiro, a trader with Renascenca in Sao Paulo.

The Brazilian currency, the real , traded 0.9 percent lower against the dollar.

In Asia, the Korean won led regional currency gains, rising 0.8 percent to one-month highs, while the Thai baht strengthened 0.6 percent.

Ilan Solot, emerging markets strategist at Brown Brothers Harriman in London, said markets were "tired of selling."

Emerging stocks fell 6.6 percent in January and most emerging currencies are in the red against the euro and dollar so far this year.

"There has been a significant build-up of short positions and at any sign of improvement you will see a short-covering type of rally," Solot said.

In Europe, Hungary's forint gave up early gains to trade slightly weaker against the dollar, while the Budapest stock market dropped over 1 percent, led by a fall in Hungary's biggest bank, OTP.

The losses came after the European Court of Justice issued a legal opinion that could clear the way for Hungarian courts to rule on whether some aspects of the foreign currency loans that banks issued locally breached the law.

The government has pledged new steps to help households who are burdened with Swiss franc and euro mortgages though its earlier measures saddled the banking sector with big losses.

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For GRAPHIC on emerging market FX performance 2014, see:

For GRAPHIC on MSCI emerging index performance 2014, see:

For GRAPHIC on MSCI emerging Europe performance 2014, see:

For GRAPHIC on MSCI frontier index performance 2014, see:

For CENTRAL EUROPE market report, see:

For TURKISH market report, see:

For RUSSIAN market report, see:

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