Emerging stocks set for hefty losses
Emerging stocks and currencies mostly strengthened on Wednesday but are on track to chalk up hefty losses.
|||London - Emerging stocks and currencies mostly strengthened on Wednesday but were on track to chalk up hefty losses on the quarter as tumbling commodity prices and concerns over the health of China's economy took their toll.
MSCI's broadest emerging stock index rose 1.7 percent on the day, lifted by shares in Asia where the ex-Japan index gained almost 2 percent and bourses across central and eastern Europe. Russia's rouble and South Africa's rand strengthened 1 percent against the dollar, and Turkey's lira also gained.
Yet emerging market assets were on track for a steep drop on the quarter following falls across global markets, commodity prices taking another tumble and concerns over the health of the world's second largest economy.
Shares wiped out a fifth of their value in the three months to end-September to rack up their biggest quarterly losses in four years.
Currencies fared little better with Turkey's lira and South Africa's rand also recording the steepest fall in four years against the dollar over the period - the latter having suffered fourteen straight quarters of weakening. Russia's rouble also ended the quarter in the red.
“It has been quite dreadful for emerging markets, especially the last couple of months, and China is definitely one of the main driving factors,” said Cristian Maggio, head of emerging markets research at TD Securities.
“The decision of the PBOC to devalue the yuan in August has been the opening of Pandora's box, and suddenly the market realised that there could be a much much more serious issue with China than what had been priced in up to that moment.”
Currencies fared better across central and eastern Europe, in economies less exposed to the commodities cycle dominated by China's appetite for resources and benefiting from the European Central Bank's quantitative easing.
Hungary's forint, the Czech crown, the Romanian leu and the Serb dinar all strengthened against the euro over the past three months and traded broadly flat to higher on Wednesday.
Stock markets across the region also rose on the day, with bourses in Prague and Warsaw up around 0.8 percent. Bucharest shares added 0.5 percent as the central bank kept interest rates unchanged at a record low of 1.75 percent and Deputy Governor Bogdan Olteanu said it may not need to raise until early 2017 when it expects inflation to return into its targeted interval.
REUTERS