(Bloomberg) — Emerging-market equities jumped by the most this year after Chinese manufacturing activity rose at the fastest pace since June 2022. Election results triggered volatility across emerging markets, with Mexico’s peso tumbling and South Africa’s rand soaring.

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MSCI Inc.’s EM stock benchmark rose as much as 2.3%, its biggest intraday move since November, led by Asian technology companies. The counterpart gauge for currencies advanced as much as 0.3%. US Treasury yields sank.

China’s manufacturing activity expanded at the fastest pace in almost two years in May, according to a private survey, contrasting with weak official data. Stocks held onto their gains after US manufacturing data in May came in worse than expected, while orders fell by the most in almost two years, fueling hopes for rate cuts this year.

Elections continue to impact emerging-market assets. The Mexican peso slid as much as 4.2% after preliminary election results showed the ruling party winning a broad majority in both chambers of congress, stoking concern it will increase state control of the economy and undermine checks on its power. Mexican stocks fell as much as 4.4% on an intraday basis.

While polls in the run-up to the election had showed the ruling Morena party candidate Claudia Sheinbaum held a comfortable lead, investors were surprised by the results in Congress — which could even hand the party a super majority.

Read more: AMLO Protege Sheinbaum Becomes First Female President in Mexico

The Mexican peso is performing “unfavorably and contrary to the trend we see in other Latam currencies such as the BRL and the CLP.” said Marco Oviedo, a senior strategist at XP Investimentos. The Morena Party getting full control of Congress and in turn being able to make constitutional changes is seen as a “big negative.”

Elsewhere, the rand strengthened after swinging between gains and losses, as investors braced for further upheaval in South Africa after last week’s elections produced no outright winner, with the outcome of ongoing coalition talks remaining highly uncertain. The African National Congress fell short of a parliamentary majority for the first time since it took power three decades ago.

Meanwhile, Indian stocks surged to a record, while the rupee and sovereign bonds climbed after exit polls signaled an emphatic victory for Prime Minister Narendra Modi’s ruling party.

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‘Non-Friendly Policies’

Attention will also turn this week to the anticipated start of the European Central Bank’s rate cuts.

“In addition to central bank policy meetings overseas this week, the market will be looking at the fall-out of election results in Mexico and South Africa,” ING strategist Chris Turner said in a note. The risks include Mexico’s Morena party using its super majority to “try to pursue market non-friendly policies.”

Deutsche Bank recommended entering tactical long positions in the dollar versus the rand on the basis that the market hasn’t fully priced in the risks surrounding the South African coalition talks.

“The chances of a messy political process over the coming weeks remains high,” Deutsche Bank said in a note. “Even if the most likely outcome remains another ANC government in the end, there is every possibility this could be weak and relatively unstable, raising concerns about policy delivery.”

–With assistance from Davison Santana.

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