JOHANNESBURG - Stock markets in emerging economies fell across the board on Monday as drastic stimulus measures from the U.S. Federal Reserve highlighted the degree of economic carnage expected from the coronavirus pandemic.
Stock markets ranging from Philippines to South Africa all lost between 2.4% and 7.9%, touching multi-year lows and taking MSCI’s index of emerging market shares down 4.2%. The index lost 12% last week - its steepest weekly loss since the 2008 global financial crisis.
The Fed slashed interest rates to near zero on Sunday and pledged to expand its balance sheet by at least $700 billion in the coming weeks, joining a coordinated move by global central banks to combat the economic fallout from the deadly flu-like virus.
“The biggest concern has to be that the big G-7 central banks have exhausted their policy tool kit... Markets now appear kind of defenseless to another selling onslaught, so the fiscal step is crucial in avoiding a dreaded global credit event,” Stephen Innes, global chief markets strategist at AxiCorp, wrote in a note.
Underscoring the pandemic’s impact on growth, data showed China’s industrial output contracting at the sharpest pace in 30 years in the first two months of the year.
Meanwhile, Brent crude extended last week’s 25% plunge, sending crude exporter Russia’s rouble down 3% to its lowest in four years.
Russia will create an anti-crisis fund of 300 billion roubles ($4.1 billion) to support its economy amid the coronavirus outbreak, news agencies said, citing Prime Minister Mikhail Mishustin.
The Mexican peso headed for new lows on worries about the impact of oil’s collapse on the state’s heavily indebted oil firm, Pemex. Most other currencies in the emerging market space found no support despite a weaker dollar.
South Africa’s rand gave up 2%, with the country’s President Cyril Ramaphosa declaring the spread of the virus a national disaster on Sunday.
A poll last week showed South Africa’s central bank would cut rates by 25 basis points on Thursday to lift the economy out of recession.
In Turkey, the lira fell 0.5% to 1-1/2-year lows. Finance Minister Berat Albayrak said measures to support the economy will be announced this week.