Trump fury over North Korea hurting emerg­ing mar­ket stocks

The Star Early Edition - - INTERNATIONAL - Karin Stro­hecker

EMERG­ING mar­ket as­sets still felt yes­ter­day the re­ver­ber­a­tions of the stand-off be­tween Wash­ing­ton and Py­ongyang, with stocks ex­tend­ing losses for a sec­ond day while cur­ren­cies fared more mixed.

In a war of words be­tween Wash­ing­ton and Py­ongyang that has un­nerved re­gional pow­ers and global in­vestors, North Korea dis­missed as a “load of non­sense” warn­ings by US Pres­i­dent Don­ald Trump that it would face “fire and fury” if it threat­ened the US.

And it out­lined de­tailed plans for a mis­sile strike near the Pa­cific ter­ri­tory of Guam.

MSCI’s emerg­ing mar­ket in­dex – dom­i­nated by Asian heavy­weight bourses such as South Korea and Tai­wan – slipped 0.6 per­cent, hav­ing lost 1.5 per­cent since Trump’s com­ments.

Tai­wan’s bourse tum­bled 1.3 per­cent, Hong Kong’s Hang Seng lost 1.1 per­cent and South Korea’s Kospi dropped as much as 1.2 per­cent to a two-month low be­fore trad­ing 0.4 per­cent lower.

Gains else­where failed to off­set the Asian losses. Turkey and Rus­sia in­dexes gained 0.4 per­cent while South African stocks edged 0.1 per­cent higher.

In­vestors faced a dilemma in how to price the lat­est po­lit­i­cal tensions, said Koon Chow, FX strate­gist at UBP.

“Most in­vestors will be com­pletely out of their depth in mak­ing any as­sess­ment on the sit­u­a­tion, there­fore one shouldn’t make a big call on this,” he said.

Still, emerg­ing mar­kets would likely face a softer patch as long as the po­lit­i­cal tensions fu­elled in­vestors’ risk aver­sion, he said.

In­vestors faced a dilemma on how to price the lat­est po­lit­i­cal tensions

“The mo­ment that shows some kind of abeyance, you will see emerg­ing mar­kets strengthen again,” he said, adding de­vel­op­ing economies still faced a be­nign back­drop over­all, thanks to lit­tle sign of mon­e­tary tight­en­ing by any of the ma­jor cen­tral banks.

Emerg­ing cur­ren­cies fared mixed against a slightly stronger dol­lar. The South Korean won weak­ened 0.3 per­cent and touched a four-week low, ex­tend­ing a sell-off from the pre­vi­ous two ses­sions.

How­ever, South Africa’s rand firmed 0.4 per­cent, re­cov­er­ing from the four-week low it hit af­ter Pres­i­dent Ja­cob Zuma sur­vived a no-con­fi­dence vote.

Rus­sia’s rou­ble gained 0.3 per­cent, lifted by oil prices.

The Philip­pine cen­tral bank left its bench­mark in­ter­est rate un­changed as ex­pected, with in­fla­tion not a con­cern, even as the econ­omy ex­pands at a solid pace this year.

Cen­tral banks in Ser­bia, Mex­ico and Peru, which were also due to pub­lish their de­ci­sions yes­ter­day, were also ex­pected to keep rates un­changed. – Reuters

PHOTO: REUTERS

A man looks at a mon­i­tor show­ing news of North Korea’s fresh threat in Tokyo, Ja­pan, yes­ter­day. Emerg­ing mar­ket as­sets ex­tended losses for a sec­ond day.

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