Currency storms rage on

> Stocks wipeout nears US$1 trillion as trade war and general economic health worries investors

LONDON: Emerging markets storms raged fiercely yesterday, with South Africa’s rand at the centre of fresh currency tumult and losses since January for the world’s biggest EM stock index nearing US$1 trillion again (RM4.14 trillion).

It was another torrid session in both Asia and fragile EMEA markets. Indonesia’s stock market had suffered its worst day in over five years as its currency pains worsened while Chinese equities fell almost 2% in Shanghai.

The rand then slumped to a more than 2-year low in a fresh 1.5% drop as traders also dumped its bonds and the most globally traded EM currency, the Mexican peso, too.

The latest peg for the spreading angst had been another 3% overnight drop for Argentina’s peso after news that it was trying to engineer a rapid injection of support from the International Monetary Fund.

Trade war and general economic health worries were raw too, with investors wary of the threat of fresh US tariffs on another US$200 billion worth of Chinese goods that could take effect after a public comment period ends today.

“Given the magnitude of the move in Argentina, I think the focus is still on that and on possible contagion,” said North Asset Management EM portfolio manager Peter Kisler.

There was no evidence of wide-spread contagion yet he added, though what global stock markets do next could be crucial.

The day’s falls across markets left MSCI’s 24-country EM stocks index down for a sixth straight day and down almost 20% from late January, a move that has wiped over US$950 billion off its combined worth at the time.

The biggest individual move saw Indonesian stocks slump almost 5% at one point in the biggest fall since 2013 as the rupiah currency wobbled around its lowest levels since the Asian financial crisis in 1998.

The central bank said it had “decisively intervened” in FX and bond markets in morning trade.

“EM equities have really been underperforming developed markets. This will end sooner or later, but my feeling is that development markets will catch up to EM rather than that EM will bounce significantly.” – Reuters