EM stocks ex­tend post-Trump slide

Kuwait Times - - BUSINESS -

LON­DON:

Emerg­ing mar­ket stocks fell for the ninth time in 11 days yesterday, tak­ing their drop since Don­ald Trump’s US elec­tion win to 7.5 per­cent and leav­ing in­vestors fac­ing an un­cer­tain start to 2017. Fes­tive cheer was in short sup­ply with some of the same wor­ries that brought a tor­rid start to 2016 for EM as­sets start­ing to resur­face. Chi­nese stocks , which are head­ing for a 17 per­cent wal­lop­ing for the year, most of which came in Jan­uary, fell to a two-month low, while the yuan limped back to­wards an 8-1/2 year low.

As was the case at the be­gin­ning of the year, EM cur­ren­cies are being forced to bow to the dol­lar as the prospect of fur­ther US rate hikes and a fis­cal spend­ing drive un­der Don­ald Trump loom. South Africa’s rand, Turkey’s lira and Mex­ico’s peso took ad­van­tage of the quiet pre-Christ­mas mar­ket to nudge higher. So did Poland’s zloty and Hun­gary’s forint af­ter they had both hit more than 14-year lows ver­sus the green­back on Thurs­day.

But Asia con­tin­ued to strug­gle. The South Korean won hit a fresh 9-month low at 1,204.5 per dol­lar, the Tai­wan dol­lar touched its low­est in nearly five months and Sin­ga­pore’s cen­tral bank was sus­pected to have in­ter­vened to prop up its dol­lar af­ter it fell to a more than six-year low. “We have al­most come full cir­cle on the dol­lar at­ti­tude,” said UBP’s EM macro and FX strate­gist Koon Chow. “Sim­i­lar to a year ago, we are ex­pect­ing more US rate in­creases and also sim­i­lar to a year ago we are see­ing ren­minbi (yuan) de­pre­ci­a­tion pres­sure due to out­flows and ar­guably that could in­ten­sify next year.”

One of the rea­sons could be lower de­mand for yuan to buy prop­erty as Beijing bids to cool the over­heat­ing parts of the coun­try’s hous­ing mar­ket. An­other is un­cer­tainty about how China’s re­la­tions with the United States will fare un­der Don­ald Trump. Chi­nese state media yesterday ex­pressed alarm and warned of a “show­down” af­ter the pres­i­dent-elect named Peter Navarro, an econ­o­mist who has urged a hard line against Beijing, to head a new White House Na­tional Trade Coun­cil. “The new ad­min­is­tra­tion should bear in mind that with eco­nomic and trade ties be­tween the world’s two largest economies now the clos­est they have ever been, any move to dam­age the win-win re­la­tion­ship will only re­sult in a loss for both sides,” the of­fi­cial English-lan­guage China Daily said in an ed­i­to­rial. — Reuters

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