London / Seoul - Turkey’s lira tumbled to a record low, India’s Sensex sank and stocks across the Middle East fell yesterday as RIA Novosti reported the detection of a missile launch in the Mediterranean. China’s benchmark equity index rose to a 10-week high as economic prospects improved.
The MSCI emerging markets index lost 0.1 percent to 937.65 by 12.19pm in London, erasing gains after the RIA Novosti report.
The Israeli Defence Ministry said a missile launch yesterday morning detected by Russia’s tracking system was a test.
The Israeli shekel weakened for the first time in five days and benchmark stock indices in Turkey, Israel, Dubai, Kuwait and Abu Dhabi retreated.
“The missile spooked the market,” said Michael Ganske, the head of emerging markets at Rogge Global Partners in London. “It’s a good indication of what we have to expect in the coming month: a very nervous market.”
Akbank, the Turkish lender part-owned by Citigroup, fell 2 percent, as the Borsa Istanbul National 100 index slid 1.2 percent and the lira fell more than 1 percent.
India’s Standard & Poor’s (S&P) BSE Sensex index dropped 3.6 percent, while the rupee extended declines as oil rose and S&P reiterated the nation’s sovereign rating might be downgraded to junk.
The Shanghai composite index increased 1.2 percent after Chinese Premier Li Keqiang said he was confident that the country would meet this year’s economic goals.
Stocks in India, which depends on imports for 80 percent of its oil needs, led losses among major emerging markets. Reliance Industries, owner of the world’s largest oil refining complex, retreated 6.3 percent, the most in four years. Cigarette maker ITC fell 6.2 percent, the most since February 2010.
The rupee slid 3.1 percent, extending Monday’s 0.5 percent loss after S&P analyst Kim Eng Tan said there was a more than one in three chance for an India ratings cut within two years and the possibility of a downgrade was higher than for Indonesia.
This was “not time to buy back the most fragile markets”, said Martial Godet, the head of emerging-markets strategy at BNP Paribas in London. “North Asia still seems to be the place to hide thanks to the stabilisation or rebound of the Chinese economy.”
The worst was over for Asian emerging markets after investors pulled billions of dollars last month on concern the US Federal Reserve will start cutting back bond purchases, Nomura Holdings said.
“We’re through the worst of the crisis but it doesn’t mean individual countries won’t continue to suffer significant challenges,” said Steve Ashley, the head of global markets at Nomura. “We remain relatively positive on the longer-term performance of risk assets in Asian emerging markets.”
Debt sales disappointed in Indonesia and Taiwan. Indonesia was unable to raise as much money as planned at an Islamic bond auction for the first time since July, while a sales of Treasury bills in Taiwan fell short of the government’s goal for the first time since 2011.
However, the premium investors demand to own emerging market government dollar bonds over US Treasuries fell 6 basis points, or 0.06 of a percentage point, to 352 basis points, according to JPMorgan Chase indices. – Bloomberg