Factory data hit emerging markets
WEAK factory activity data and a US proposal for higher tariffs on $200 billion (R2.6 trillion) of Chinese imports weighed on investor appetite for emerging-market stocks yesterday, while a stronger dollar created headwinds for currencies.
MSCI’s benchmark emerging-stocks index fell 0.2 percent in early trade after discouraging data out of China set the tone, before recovering to trade flat in European hours.
A private survey showed that Chinese manufacturing grew at the slowest pace in eight months in July as export orders declined in their worst slump since June 2016.
Chinese mainland shares tumbled 2 percent to a near two-week low, their worst daily loss in a month. Hong Kong shares fell 0.9 percent, while the yuan weakened 0.2 percent offshore. The yuan has suffered its worst four-month fall on record.
Investor sentiment was also crushed by Washington’s plans to propose higher tariffs of 25 percent on $200bn worth of Chinese imports, after initially setting them at 10 percent. This revived fears of an escalating trade war, even as Bloomberg reported that the US and China were seeking to restart negotiations.
The worry is that tit-fortat tariffs will crimp global growth, by affecting integrated supply chains and hitting export-oriented emerging economies hard.
Other manufacturing surveys from across emerging Asia told a similar story to China’s, with South Korean factory activity contracting for a fifth month, marking the worst slump since November 2016.
In emerging Europe, Russian, Turkish and Polish manufacturing activity also slowed.
The outperformers included Indonesia, which rose 1.6 percent, and South Korea, up 0.5 percent, with the latter’s July exports up 6.2 percent year-on-year. Tech-heavy Taiwan also got a boost, up 0.4 percent to two-week highs after Apple beat expectations for its quarterly results.
Currencies were mainly weaker, with Turkey’s lira among the biggest fallers, down 0.4 percent, a day after the central bank sharply raised its inflation forecast for this year and next.