Emerging stocks tumble and currencies slide on Greece
CHINESE EQUITIES IN SHANGHAI POISED TO ENTER BEAR MARKET, MSCI EMI FALLS 1.7%
Emerging-market stocks headed for the steepest drop since December and currencies slid as the collapse of Greek aid talks damped demand for riskier assets. Chinese equities in Shanghai were poised to enter a bear market.
The MSCI Emerging Markets Index fell 1.7 per cent to 964.10 at 11.42am in Hong Kong. Taiwan’s Taiex Index tumbled 2.4 per cent, while equity gauges in India, South Korea, Indonesia and Malaysia sank at least 1.1 per cent.
The Shanghai Composite Index slumped 3.8 per cent, taking declines from its June 12 peak to more than 20 per cent, as an interest-rate cut failed to stem losses. The won weakened 0.5 per cent versus the dollar. Malaysia’s ringgit slid to the lowest level since 2005.
Greece shut its banks and imposed capital controls in a dead-of-night announcement to avert the collapse of its financial system as the country edged closer to an exit from the euro. China cut its benchmark lending rate to a record low over the weekend and lowered some lenders’ reserve-requirement ratios after the biggest twoweek equity rout since 1996.
“It’s all about Greece today. Going into the weekend, there was expectation that they were in agreement, only to go back on their word all of a sudden, so markets are responding poorly to it,” said Priyo Santoso, who oversees about $2 billion as chief investment officer at PT Mandiri Manajemen Investasi in Jakarta. “We expect to see the volatility continue for some time.”
Weekend of turmoil
The move followed a weekend of turmoil that started with Prime Minister Alexis Tsipras’s shock announcement late Friday of a July 5 referendum on austerity measures demanded by the country’s creditors, sending people rushing to line up at ATMs and gas stations. The risk of potential contagion if Greece leaves the euro spurred a 1.5 per cent fall in the euro on Monday and sparked declines in Asian stocks.
The developing-nation gauge has risen 0.8 per cent this year and trades at 11.7 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 3.5 per cent in 2015 and is valued at a multiple of 16.4.
All 10 industry gauges in the emerging-markets measure fell, led by technology and financial stocks. The Taiex headed for the biggest slide since Jan. 6 as Hon Hai Precision Industry Co. sank 2.2 per cent. ICICI Bank Ltd. led a 1.8 per cent drop in India’s S&P BSE Sensex index.
The Shanghai Composite tumbled as the gauge’s 10-day volatility reading jumped to the highest level since 2008. Investors who use borrowed money to buy equities on the Shanghai bourse cut their holdings for a fifth day on Friday.
Hong Kong’s Hang Seng China Enterprises Index sank 3.6 per cent, poised for the steepest drop since January 19.