EMERGING MARKETS-Stocks mixed as investors weigh US midterm win, central bank moves
By Sudeshna Ghoshal and Ragini Mathur
Nov 5(Reuters) - Emerging market stocks were mixed on Thursday as investors weighed the implications of Democrats' sweeping US midterm-election victory, a softer dollar and a run of central-bank decisions across developing economies.
The scale of Democrats' win triggered gains in US Treasuries and global equities as investors now expect greater checks on the Trump administration's agenda. But the result also fuelled uncertainty over whether the new Congress would support the scale of data-centre investment needed to sustain the AI boom.
"The most important policy implication of a Democratic landslide in the US midterm election is a prospective slowdown of data centre construction," said Thierry Wizman, global FX and rates strategist at Macquarie Group.
MSCI’s broad emerging-market equity index .MSCIEF fell 0.7%. Technology-heavy markets in South Korea and Taiwan led the decline, as investors trimmed exposure to AI-related shares. South Korea’s Kospi .KS11 was down 5.3%, while Taiwan’s TWSE .TWII lost 3.2%, marking its sixth consecutive day of losses.
The dollar, which had fallen to its lowest level in more than a month earlier in the session, was last flat. MSCI’s emerging-market currency index .MIEM00000CUS was also little changed.
"Increased congressional scrutiny on the executive branch could consume the administration's processing bandwidth, potentially softening some of Trump's unilateral aggressive rhetoric or actions, including its attitude toward the US's allies and trade partners," Wizman said.
However, trade and legal experts said on Wednesday that Democrats' win still largely leaves them unable to override US President Donald Trump's veto on any vote to overturn his tariffs or rescind trade authorities.
INVESTORS WEIGH CENTRAL BANK SIGNALS
The National Bank of Poland kept its main interest rate unchanged at 3.75% on Wednesday, saying inflation was expected to remain within its target range for the rest of 2026. The zloty weakened 0.2%, while Warsaw’s stock index .WIG was up 0.3% on Thursday.
"Monetary tightening isn't far away," said William Jackson, chief emerging-markets economist at Capital Economics.
"Inflation is set to rise again. We think that will set the scene for 50 basis points of hikes in the first few months of 2027, taking the policy rate to 4.25%."
Attention now turns to the Czech National Bank, which is widely expected to raise rates as persistent domestic price pressures and elevated energy costs threaten to revive inflation. The Czech crown slipped 0.8% against the euro, while Prague’s PX index .PX was flat.
Regional currencies have weakened in recent months under pressure from the previously strong dollar and uncertainty over energy prices linked to the US-Israeli conflict with Iran.
However, a Reuters poll showed analysts expected Hungary’s forint to lead gains among central European currencies over the next six months, with the zloty and Czech crown also forecast to strengthen.
In South Africa, the rand strengthened 0.2% and Johannesburg's main stock index .JTOPI jumped 5.3% as early municipal-election results pointed to a strong showing by the pro-business Democratic Alliance.
Elsewhere, Indonesia's benchmark .JKSE rose 2.3%, putting it on track for its strongest session since mid-October. The exchange will begin identifying whether shareholders with stakes above 1% are controlling shareholders or affiliates, a move intended to improve transparency amid concerns over market governance.
HIGHLIGHTS:
** Thailand central bank chief says 2% growth not enough
** China's cleantech stocks jump as investors bet on US policy shift
** Chipmaker YMTC's IPO on hold as China tightens share sale approvals, sources say
For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see CEE/