published Jun 30th 2016, 10:16 pm, by Choong En Han and Elffie Chew
(Bloomberg) —
Emerging-market stocks headed for the biggest weekly gain in four months and currencies rallied with oil as sentiment improved on signs central banks stand ready to inject liquidity after the U.K.’s shock decision to leave the European Union.

The MSCI Emerging Markets Index of shares climbed 3.9 percent for the week, recouping all the losses it incurred in the wake of the Brexit vote. The ringgit rose to a two month high on Friday as commodities rebounded, brightening the outlook for Malaysia as Asia’s only major net oil exporter and a producer of palm oil. Traders have almost wiped out bets for a Federal Reserve interest-rate increase this year, helping quell concern that higher U.S. rates would diminish the appeal of developing-nation assets.

South Korea’s won was on course for its best week since early March after the government announced 20 trillion won ($17 billion) in stimulus, adding to record-low interest rates. Bank of England Governor Mark Carney signaled this week that U.K. rates could come down within months as the country looks for a new prime minister to negotiate its EU withdrawal. The European Central Bank may add to its quantitative easing, while the Bank of Japan showed its willingness to inject more funds.

“The Brexit episode is still not over yet even with this relief rally,” said Danny Wong Teck Meng the Kuala Lumpur-based chief executive officer at Areca Capital Sdn. “The second half of the year would bode well for emerging markets with the U.S. using Brexit as a external risk factor to hold off rates, and the European economy being impacted by Brexit.”

Shares of consumer staples and materials companies led the week’s gains among the 10 industry groups of the MSCI gauge. Energy-related stocks climbed 3 percent from June 24 as Brent crude rallied to more than $50 a barrel, set for the best performance since May 13. The Bloomberg Commodity Index was up 2.6 percent after last week’s 2 percent tumble.

The ringgit strengthened 1.1 percent to 3.9862 per dollar as of 10:53 a.m. in Kuala Lumpur and reached 3.9818, the highest since May 4, according to prices from local banks compiled by Bloomberg. It is up 2.6 percent for the week, the most in three months. Elsewhere in emerging markets, the Brazilian real and Mexican peso led gains from June 24, while the South Korean won rose the most among Asian developing-nation currencies.

To contact the reporters on this story: Choong En Han in Kuala Lumpur at echoong6@bloomberg.net ;Elffie Chew in Kuala Lumpur at echew16@bloomberg.net To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net Simon Harvey, Jonathan Annells

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