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In China, data for FX reserves added to signs that the Chinese business cycle is bottoming. FX reserves fell by USD43.3bn, which was less than expected and a much smaller decline than in August, when reserves fell a record USD93.9bn. The valuation effects are limited as the currency movements have been small in September. Hence, intervention has been much smaller in September and the same goes for capital outflows.
Last week, the official Chinese manufacturing PMI showed signs of stabilisation and this, in combination with declining capital outflows, is underpinning risk appetite.
"We believe the positive sentiment in emerging markets can continue in the short run with positive spillover to Western markets too", says Danske Bank.
