London - Donald Trump's victory in the US presidential election set off a tidal wave of selling across emerging markets, taking equities to three-month lows as the Mexican peso led massive currency falls.
Trump, feared by markets because of his controversial views on trade, immigration and taxation, pulled off a stunning upset, sending markets into a tailspin in early trading. Some of the early losses were pared, but the flight to safe-haven trades remained undeterred.
Mexican assets were at the forefront of selling, with the peso plunging as much as 13 percent at one point before snapping back to trade around 9 percent lower by 1000 GMT. Europe-listed equity exchange-traded funds (ETFs) slumped as much as 10 percent
The Mexican central bank, which has said a Trump presidency will hit the country “like a hurricane”, is expected to raise interest rates by around 150 basis points to protect the currency.
Other moves were more muted as the dollar weakened against major currencies, although trade-reliant Asian markets lost heavily, with the Philippine peso falling to a seven-year trough.
“The uncertainties surrounding the future economic and political outlook of the world's biggest economy will likely cast a long shadow over emerging markets,” HSBC chief EM economist Murat Ulgen said in a note entitled: “Trump victory is a game changer for EM”
“Risk aversion will likely cause EM financial stress to rise,” he added.
REUTERS