Emerging shares, currencies cheered by China data but gains limited

Emerging market shares and currencies firmed on Monday after China’s economic growth for the first quarter rose unexpectedly, but gains were limited as doubts remain if it may still be too early to call it a recovery.

MSCI’s index of emerging market shares climbed 0.3% to hover near ten months highs, while its currency index rose 0.2%, with China’s yuan rising to four week highs.

China’s economy grew at a steady 6.4% pace in the first quarter, data showed, defying expectations for a further slowdown, as industrial production jumped sharply and consumer demand showed signs of improvement.

This follows a slew of positive China data since late last week and though many had expected a recovery only in the second half of 2019, analysts and traders warns of the sustainability of the turnaround.

“On one hand, positive that Q1 stimulus measures have apparently worked to reverse the Chinese economy but on the other hand, it could lead to dampened hopes of any additional stimulus and a lack of longer term follow through,” said a trader in London.

The Shanghai Composite index closed up 0.3%, while gains in Chinese blue chips were muted. Shares in Hong Kong, South Korea and SouthAfrica slipped.

But, most other bourses in the developing world rose with Turkey’s up more than 0.8% and Russia’s climbing 0.2% higher.

Currencies of emerging markets also gained against a weaker dollar. Commodity giant South Africa‘s rand firmed half a percent, while Turkey’s lira climbed 0.4% with bettering ties with the United States adding to the cheer.

Turkey’s defense minister said he had “very constructive” talks with US Acting Defense Secretary Patrick Shanahan, state-owned Anadolu news agency reported on Wednesday.

President Tayyip Erdogan’s spokesman Ibrahim Kalin said on Tuesday Turkey expects President Donald Trump to use a waiver to protect it if the US Congress decides to sanction Ankara over a planned S-400 purchase.