June 30, 2016 / 2:47 PM / 2 years ago

GRAPHIC-Latam leads, China smashed as emerging markets hit 2016 halfway mark

LONDON, June 29 (Reuters) - Emerging markets are comfortably ahead of their developed market counterparts at the year’s halfway mark, thanks to stellar gains in Latin America, Russia and Asian hotspots such as Malaysia and Indonesia.

It all comes after one of the worst starts to a year for emerging markets on record when worries about China, commodity markets and U.S. rates sparked a global rout.

Since then, however, the trend has been mostly up, as Fed rate hike prospects have evaporated and worries have eased about volatile politics within some emerging economies, fuelling robust returns across emerging asset classes, this chart shows:


“It has been a pretty good year I would say,” said Aberdeen Asset Management’s Kevin Daly. “It been about very accommodative global monetary policy conditions, secondly the easing concerns about China’s currency and capital flight, and you have also had a pretty strong bounce in commodities prices.”

The biggest exception has been China where the yuan ended the second quarter with its biggest quarterly fall on record and mainland-listed A-shares down almost 20 percent in dollar terms since the start of the year.

Peru has been the star emerging equity performer with a 46 percent surge in dollar terms with Brazil and Colombia posting gains of 40 percent and 24 percent respectively to complete a South American clean sweep of the top three: link.reuters.com/weh36s

Asia’s best performer Thailand is up 17 percent and Russian shares have jumped 19.5 percent, thanks to an 85 percent rebound in oil prices since mid-January.

As this graphic shows link.reuters.com/map94w it has been a similar story among currencies.

After a torrid 2015, the Brazilian real is up 20 percent against the dollar, rallying as left-wing president Dilma Rousseff was removed from office, while the rouble is up almost 13 percent.

Local-currency emerging market debt has done its bit too, posting returns of 13.5 percent in dollar terms, a third more than U.S. Treasuries and above the 10 percent enjoyed by ECB turbo-charged German Bunds Bunds. reut.rs/1Rx8jLT reut.rs/1ZKAaO6

Bringing up the rear, a less market-friendly government in Poland and potential spillover of the UK’s Brexit vote have pushed stocks 7 percent lower, while the zloty has fallen 3.5 percent against the euro, weakening more than its neighbours.

Mexico’s has also disappointed with a near 7 percent drop. Nigeria’s naira, freed of its dollar peg, is down 30 percent and the Argentine peso has fallen 13 percent as it continues to adjust to last year’s FX liberalisation.

Reporting by Marc Jones; Editing by Mark Heinrich

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