Emerging Markets Emerging stocks sink as China shares extend rout; ruble tumbles

by **Cals** Thu 21 Jan 2016, 18:19

Emerging Markets
Emerging stocks sink as China shares extend rout; ruble tumbles
By Bloomberg / Bloomberg | January 21, 2016 : 5:15 PM MYT

MANILA/HONG KONG (Jan 21): The selloff that rocked emerging-market assets showed no signs of easing, as slumping oil and a rout in Chinese shares prompted investors to shun riskier assets. Russia’s ruble tumbled to lead a gauge of developing-nation currencies to a record low.
Chinese equities in Shanghai and those in Hong Kong sank as the central bank’s biggest cash injection in the financial system in three years failed to ease concern that the economic slowdown will deepen. Philippine stocks fell to a 23-month low amid a selloff by foreign funds. Price swings in the MSCI Emerging Markets Indexwere at the highest since October. Dubai paced losses among Persian Gulf equity markets and the ruble headed for a record low as Brent oil extended its decline from a 12-year low. South Africa’s rand halted a two-day gain.
Thirty-day historical volatility in the developing-nation equity measure is at a three-month high amid growing turmoil that has rocked emerging markets as anxiety over China’s ability to manage the economic slowdown and slumping oil prices cloud the outlook for global growth. More than US$2 trillion has been wiped out from the value of developing-nation equities in 2016, with the equity index posting the worst ever start to a year.
“We will still see a very volatile period as markets are still faced with the conundrum on oil and global growth, so funds won’t come in a big way,” Robert Ramos, who helps manage about US$836 million as chief investment officer at Union Bank of the Philippines, said in Manila. “Some investors are coming in, because valuations have become cheaper. Have we reached bottom? Your guess is as good as mine,” He said he’s selectively picking stocks and holding cash.
The MSCI Emerging Markets Index slid 0.6% to 688.34 at 8:11 a.m. in London, reversing earlier gains of as much as 0.9%. The gauge is poised for the lowest close since May 2009, sending valuations to the cheapest since March 2014. The measure slid 3% on Wednesday. The 14-day relative strength index has been hovering below 30, a level that some analysts say signals a rebound is imminent, since Jan 6.
The developing markets measure has declined 13% and trades at 10.1 times its 12-month projected earnings, compared with a multiple of 14.3 for the MSCI World Index, data compiled by Bloomberg show.
Stocks
All 10 industry groups in MSCI’s developing-markets gauge dropped, led by industrial and utility companies. Hong Kong’s Hang Seng China Enterprises Index sank 2.2% to the lowest close since March 2009. The Shanghai Composite lost 3.2% to the lowest since Dec 2014. The gauges have both fallen 19% this year, making them the worst-performing major global benchmark measures out of the 93 tracked by Bloomberg.
China is trying to hold borrowing costs down to support its economy without spurring an exodus of funds that drove the yuan to a five-year low this month. The People’s Bank of China said Thursday it conducted 110 billion yuan (US$16.7 billion) of seven-day reverse-repurchase agreements and 290 billion yuan of 28-day contracts. A gauge of interbank funding availability jumped the most in 13 months on Wednesday, ahead of next month’s Chinese New Year holiday.
The Philippine stock index dropped 2.8% to the lowest level since Feb. 2014. Foreign investors have pulled US$63 million from the nation’s shares in January, poised for a record 10th straight month of withdrawals. The measure entered a bear market on Jan 11. India’s S&P BSE Sensex headed for the lowest close since May 2014, while Vietnam’s VN Index sank to the lowest since December 2014.
Dubai stocks dropped 1.8%, while shares in Saudi Arabia declined 1%. Brent futures slid as much as 1.2% in London, after falling 3.1% Wednesday to settle at the lowest level since November 2003, as rising U.S. crude stockpiles added to a swelling global glut.
Currencies
The ruble weakened 3.3%, poised for the steepest two-day drop since April, while the rand declined 0.4%. A gauge tracking 20 developing-nation currencies slipped 0.3%, as the rand halted a two-day gain.
Malaysia’s ringgit strengthened 0.4%, before an interest-rate decision on Thursday. Bank Negara Malaysia will keep its benchmark interest rate at 3.25% for a ninth straight meeting, according to all 20 economists in the Bloomberg survey.
Malaysian monetary policy is already accommodative and the nation also needs other policies to support growth, Governor Zeti Akhtar Aziz said in Hong Kong on Monday.