EMERGING MARKETS – Stocks hit nearly six-week low amid Chinese worries and tech rout
* Baidu, Alibaba and Tencent fall
* Ruble leads EMEA losses
* Romanian and Polish c.banks expected
Oct. 5 (Reuters) – Emerging market equities hit an almost six-week low on Tuesday amid concerns over the Chinese real estate market and as a technology rout spread to the United States, while the decline risk sentiment hurt most currencies.
Concerns about rising defaults by Chinese real estate companies grew after Fitch downgraded Sinic Holdings, and as investors digested China Evergrande’s efforts to write off its massive $ 300 billion debt.
Markets were also reeling from a sharp drop in US tech stocks, with Hong Kong-listed Baidu Inc, Alibaba Group and Tencent among the largest emerging markets (EM) stocks, down 1% to 1.5%.
MSCI’s benchmark emerging equities fell nearly 0.3%, while South Korea’s tech-heavy index fell 1.9%.
Rising US Treasury yields weighed on most emerging market currencies, with the Russian ruble leading the way in Europe, Middle East and Africa (EMEA) dropping 0.4%.
Investors were waiting for the government to unveil a currency buying plan that could hurt the ruble.
The ruble received little support from a surge in oil prices, which peaked around three years after OPEC + said it would only increase supply gradually.
But Russian stocks rose 0.8%, leading gains in the EMEA region as oil and gas heavyweights benefited from rising crude prices. Gazprom rose 1.3%.
Investors feared that rising commodity prices would fuel inflation and disrupt economic activity, especially in emerging markets.
“While technology led the decline, selling was rampant with only energy and utilities showing gains. – And for obvious reasons, because soaring energy prices fueled fears of at least disruptive inflation, or even outright stagflation, ”Mizuho analysts wrote in a note.
“The ‘double deficit’ and / or high inflation of emerging currencies vulnerable to rising energy import costs, may be subject to restraint or worse depreciation despite a weaker dollar. “
Global economies have been grappling with soaring inflation this year, driven by rising commodity prices and as the removal of COVID-related restrictions spurred a rebound in economic activity.
Several central banks in emerging markets have entered rate hike cycles this year in response to rising prices. Investors are now waiting for a potential hike in Romania later today, while Poland’s central bank is also expected to raise rates this week.
But with US inflation also heating up, the possibility of hawkish Federal Reserve action has weighed on emerging markets in recent sessions.
For the CHART on the performance of emerging market currencies in 2021, see tmsnrt.rs/2egbfVh For the CHART on the performance of the MSCI emerging index in 2021, see tmsnrt.rs/2OusNdX
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For the report on the RUSSIAN market, see (Reporting by Ambar Warrick, edited by Ed Osmond)