By Sujata Rao
LONDON, Oct 13 (Reuters) - The South African rand jumped to two-week highs on Friday after a court ruling that upheld reinstating corruption charges against unpopular President Jacob Zuma, while the rally on broader emerging markets continued.
MSCI's emerging equity index inched to new six-year highs on back of encouraging Chinese trade data, record high world shares and a further fall in U.S. yields, while a flat dollar encouraged emerging currencies higher on the day.
JPMorgan's ELMI Plus currency index closed Thursday at a three-week high and local debt yields slipped 3 basis points on average over the week, to hover just above the 6 percent mark.
The South African rand firmed almost 1 percent, thanks to a Supreme Court decision to uphold a High Court ruling that reinstated graft charges against Zuma. Bond yields slipped to a one-week low.
"I'm not surprised the market has taken it positively, but the issue is really who is going to take over from (Zuma) at the end of the year. Whether or not he gets his just desserts is a side issue," said Paul Fage, senior emerging markets strategist at TD Securities.
He was referring to the ruling African National Congress's December conference at which Zuma will be replaced.
The emerging markets rally is down to this week's dollar retreat - the greenback has lost 0.8 percent this week against a basket of currencies - but the party could be scuppered if data due later in the day reveals a pick-up in U.S. inflation.
On the other hand, data earlier on Friday showed strong growth in Chinese exports and imports - crucial ahead of next week's 19th Communist Party Congress.
That helped the yuan to three-week highs, putting it on track for a weekly 1 percent gain versus the dollar. That in turn lifted other Asian currencies, especially after Singaporean data reinforced the picture of robust growth across the developing world
Morgan Stanley analysts told clients they remained bullish on emerging markets, adding: "We remain of the view that EM currencies will be resilient in the face of gradual moves higher in U.S. yields, considering the strong growth momentum and valuation support many emerging markets."
One of the exceptions to this week's emerging market rally is Turkey, which is involved in a visa dispute with the United States. The lira rose slightly on the day but is set for a fifth week of losses.
Although the visa row seems to be ebbing, Morgan Stanley wrote: "We stick with our 'dislike' stance on lira".
Investors are also closely watching Mexican markets, which could suffer hefty losses should talks on renegotiating the NAFTA free-trade deal fail. Sources with knowledge of the talks called the atmosphere "horrible", with Mexico saying it is already working on a Plan B.
The peso is trading near five-month lows and Mexican stocks have fallen 0.7 percent on the week so far
For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1123.97 +2.35 +0.21 +30.35
Czech Rep 1053.05 -1.83 -0.17 +14.26
Poland 2533.38 -4.31 -0.17 +30.06
Hungary 38614.23 -157.85 -0.41 +20.66
Romania 8030.90 +33.68 +0.42 +13.35
Greece 758.19 +6.84 +0.91 +17.80
Russia 1147.72 +3.76 +0.33 -0.40
South Africa 51331.89 -20.93 -0.04 +16.92
Turkey 05749.99 -182.26 -0.17 +35.34
China 3391.54 +5.44 +0.16 +9.28
India 32456.60 +274.38 +0.85 +21.90
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.84 25.86 +0.07 +4.52
Poland 4.26 4.27 +0.17 +3.35
Hungary 308.39 308.49 +0.03 +0.14
Romania 4.58 4.59 +0.01 -1.08
Serbia 119.21 119.37 +0.13 +3.47
Russia 57.61 57.75 +0.24 +6.34
Kazakhstan 334.36 334.37 +0.00 -0.21
Ukraine 26.52 26.57 +0.19 +1.81
South Africa 13.39 13.47 +0.64 +2.56
Kenya 103.20 103.20 +0.00 -0.80
Israel 3.50 3.50 -0.09 +9.99
Turkey 3.65 3.65 +0.02 -3.38
China 6.59 6.59 -0.00 +5.43
India 64.90 65.05 +0.24 +4.70
Brazil 3.17 3.17 +0.00 +2.64
Mexico 18.89 18.90 +0.09 +9.68
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 305 0 .00 8 05.54 1
All data taken from Reuters at 09:02 GMT. Currency percent change calculated from the daily U.S.
close at 2130 GMT.
(Reporting by Sujata Rao and Marc Jones; editing by Mark Heinrich)
Our Standards: The Thomson Reuters Trust Principles.