Mumbai - Emerging-market equities headed for the worst weekly drop in a month and currencies retreated as anxiety over the worsening outlook for global growth sapped demand for riskier assets.
South Korea’s Kospi led declines on Friday, poised for the biggest week slide since August. Chinese shares traded in Hong Kong slumped while markets in mainland China, Taiwan and Vietnam remain closed for Lunar New Year holidays. Malaysia’s ringgit and Thailand’s baht depreciated the most and a gauge of 20 developing-nation currencies was set for its first five-day loss since mid-January.
World equities descended into a bear market on Thursday amid growing scepticism that central banks can arrest the slide in the world economy, and as crude oil in new York closed at the lowest level in more than 12 years. Signals from central banks in Europe and Japan that additional stimulus is likely did little to ease investor concern. A second day of testimony from Federal Reserve Chair Janet Yellen in which she indicated the US won’t rush to raise interest rates again failed to stem the selloff.
“Concern over the global outlook will continue to hurt sentiment in stocks and currencies, particularly among North Asian economies that rely heavily on exports,” said Kim Kwie Sjamsudin, head of research at Yuanta Securities Indonesia in Jakarta. “There are pockets of opportunities in some markets, such as India and Indonesia, which still offer positive earnings growth.”
Also read: Asian shares slide amid gloom
Stocks
The MSCI Emerging Markets Index of shares fell 0.5 percent to 709.85 as of 1:04 p.m. in Hong Kong. The gauge was down 4 percent for the week, the steepest loss since Jan. 15. Seven of the 10 industry gauges declined, led by healthcare. Celltrion Inc. dropped 8.5 percent in Seoul, following a record-high close on February 4.
The emerging-market measure fell 11 percent this year and is valued at 10.7 times estimated 12-month earnings, compared with 15 for the MSCI World Index, which dropped 12 percent in 2016.
South Korea’s Kospi lost 1.3 percent on Friday and was headed for its lowest close since August. Amorepacific Corp. dropped 6.6 percent. The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong fell 1 percent, set for the lowest close since 2009. Chinese exchanges will reopen on Monday.
Currencies
The index of developing-nation currencies declined 0.1 percent Friday, taking its drop this week to 0.6 percent, the most since January 15. The gauge is down 1.5 percent this year and reached a record low in January.
The ringgit weakened 1.1 percent and the baht retreated 0.8 percent in its biggest loss since October. The South Korean won fell 0.7 percent and South Africa’s rand 0.5 percent. The offshore yuan dropped 0.22 percent in Hong Kong ahead of the reopening of onshore trade on Monday.
“The risk-off sentiment continues as there’s concern about the state of the global economy, and with the paring back of rate-hike expectations there are more concerns about the health of the US economy,” said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group in Singapore. “All those things have transpired to send equities lower and impact currencies.”
Bonds
Malaysia’s sovereign bonds rose, with the 10-year yield falling 14 basis points to 3.92 percent, prices from Bursa Malaysia show. In Indonesia, the equivalent yield climbed two basis points to 7.97 percent and Thailand’s rose three basis points to 2.02 percent.
BLOOMBERG