Leading emerging market equity indices were broadly higher early this week. Central banks in Brazil, Russia, India and China continue to ease monetary policies and interest rate benchmarks, as well as follow suit of their Western counterparts by instituting a range of emergency relief measures, including buying shares in banks.

Although the US dollar continues to appreciate as investment funds are repatriated and US and foreign investors seek a safe haven in the dollar and short-term government securities, international financial conditions appear to be stabilizing, at least temporarily, which is good news and a welcome respite.

China's Shanghai Composite Index ended the day 0.5% lower Monday at 1719.77 over worries about slowing earnings growth in the face of economic contraction in key export markets even as the Chinese central bank lowered its one-year lending and deposit rates by 27 basis points (0.27%)--its third cut in six weeks.

And, even though Hong Kong's Hang Seng index is overweighted with financial and property companies, the benchmark index closed up strongly, up 375.7 points, at 14344.37 after recording its worst month in history in October.

India's Sensitive Index rose 5% Monday morning after the Reserve Bank cut interest rates and reserve requirements over the weekend with banking stocks leading the way. Russian shares were trading sharply higher early Saturday in advance of a three-day holiday that began Sunday. The MICEX index was up more than 4.5% led by Gazprom, Gazprom Neft, Skerbank Russia and Federal Grid.

Brazilian banks and shares got a lift as Banco Itau announced that it will buy competitor Unibanco Holdings, which last month announced that it had a 1-billion real (the Brazil currency) exposure related to foreign exchange derivatives on behalf of clients. The transaction will result in the creation of the biggest banking group in Latin America, and spurred speculation of more mergers to come. The Bovespa index rose 2.3% to 38,115 Monday. Banco Itau's shares rose 8.7%, to 14.93 reals.

It's looking increasingly like we may have seen the worst of hedge and private equity fund de-leveraging, redemptions, the unwinding of carry trades and the flight to safety, at least for the near term. If emerging market central bankers, governments and industry leaders can build on the positive momentum, and focus on shoring up their domestic economies and financial systems without resorting to printing money, fund flows from locals rushing to make deposits in the US and elsewhere overseas, may even begin to reverse.

That and signs that leading creditor and emerging market economies have de-coupled from their counterparts in the US and Western Europe are two key signs that I will be keeping an eye on.

Jeff Manera, Editor

G3 Global Options
G3 Global Investor
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net