Emerging market stocks on the decline

Emerging market stocks were on track for their steepest one-day fall in two weeks yesterday, following yesterday’s decidedly negative lead from Wall Street, while most emerging market currencies clocked losses against a slightly firmer dollar.

MSCI’s index of developing world stocks dropped 1.2 per cent, while its index of emerging market currencies slipped 0.3 per cent.

US benchmark stocks notched a 3.2 per cent fall as the US bond market sent unsettling signs about economic growth and investors began worrying anew about global trade, with no immediate signs of a concrete US deal with China.

That slide set the tone for risk sentiment towards developing world stocks yesterday, said Jakob Christensen, head of EM research at Danske Bank.

Emerging market currencies edged lower as traders locked in gains that had been made on Tuesday, when they scaled a near four-month closing peak.

“It’s partly trade-related angst along with the Fed’s dovish stance playing out but also some profit-taking after a significant rally by EM currencies in the past couple of days,” said Mr Christensen.

Stock exchanges across Asia tipped into negative territory, with China’s Shanghai Composite Index down 0.6 per cent.

Stocks listed in Hong Kongdeclined 1.6 per cent to record their sharpest one-day slide in more than two weeks.

Turkey’s BIST 100 index was 0.8 per cent lower, with Akbank’s 6.3 per cent decline leading the losses after the bank announced a capital raising.

The Turkish lira firmed up marginally. The country’s central bank said it could directly intervene in the market directly in case of excessive volatility and “unhealthy price formations” stemming from speculation.

However, the bank said yesterday it would stick with a 5 per cent inflation target for 2019, an ambitious goal given that the inflation rate now hovers at more than 21 per cent, near a 15-year high.

India’s rupee was 0.1 per cent stronger. The Reserve Bank of India kept rates unchanged yesterday, as broadly expected by the market. The bank maintained its “calibrated tightening stance”.