Global sell-off hits emerging stocks


Emerging market stocks hit their lowest in 19 months yesterday after disappointing forecasts from US chipmakers set off a rout in global markets, with tech-heavy indexes in South Korea and Taiwan bearing the brunt.Turkey’s central bank meets on interest rates later in the day, with analysts predicting it would hold off on adding to a dramatic 625 basis point rise in rates last month which helped stave off a currency crisis.

Questions about the strength of global growth will also loom at a European Central Bank meeting that is expected to acknowledge the deterioration without letting it derail its carefully crafted retreat from stimulus. The worries about growth and profit that drove Wall Street’s worst day since 2011 on Wednesday have been weighing on markets in the developing world all year. “Emerging markets are very exposed to global dynamics, the liquidity conditions, the US dollar strength and trade tensions,” said Jonas David, FX strategist at UBS Global Wealth Management in London.

“The question is how these elements that we see on the trade side are impacting not only the tech sector but equity markets more broadly,” he added, referring to the ongoing Sino-US trade war. MSCI’s index of emerging market stocks fell up to 1.7% to its lowest since March 2017, with markets in South Korea and Taiwan, which rely on tech exports to the United States, hitting lows not seen since early last year. The MSCI emerging market tech index declined by as much as 2.8% to a one and a half year low.Turkey’s benchmark stock index dropped to a three-week low, while South Africa’s blue-chips index hit its lowest in more than seven-months, compounded by Wednesday’s bleak budget.

Chinese stocks, sharply lower a day earlier, closed higher. Turkey’s lira was muted at 5.68 per dollar ahead of its central bank’s decision on interest rates later in the day when it is seen holding rate steady. South Africa’s rand touched a three-week low against the dollar a day after it posted its worst session in seven weeks after its government unveiled a medium term budget with wider deficit estimates and lower growth forecasts. “The new parameters of the mid-term budget speech should remind investors of the real challenges for the South African economy, which is subdued economic growth and rising debt to GDP ratios,” analysts at Credit Suisse said in a note.

Sources and photo-credits: Gulf Times