London: Emerging-market stocks tumbled the most in four months, with a rout in mainland shares triggering a trading halt, as weak Chinese manufacturing data and escalating tension in the Middle East sparked a selloff in riskier assets. Russia’s rouble strengthened with oil.
Technology shares led all industry groups lower in the MSCI Emerging Markets Index. China halted trading in stocks, futures and options for the rest of the day after a 7 per cent slump in the CSI 300 Index caused the nation’s new circuit breakers to kick in. A gauge of developing-nation currencies fell toward a record low, paced by South Korea’s won. The offshore yuan slid the most since August. The rouble rose as oil prices gained for a second day.
Developing-nation stocks and currencies are entering 2016 with more losses as concern deepened that the slowdown in the world’s second-biggest economy will curb global growth. The worst-ever start to a year for Chinese equities came after data showed manufacturing shrank for a fifth straight month and investors anticipated the end of a ban on share sales by major stakeholders. Saudi Arabia cut ties with Iran and expelled the Islamic Republic’s diplomats, a day after its embassy in Tehran was attacked to protest the Saudis’ execution of a prominent Shiite cleric.
“It’s a poor start to the year with a lot of bad news such as weak economic data from China and heightened tension in the Middle East,” Win Udomrachtavanich, Bangkok-based chief executive officer at One Asset Management Ltd., which oversees about $3.5 billion (Dh12.8 billion), said by phone. “Further economic slowdown in China will definitely hurt the developing countries’ growth.”
The MSCI Emerging Markets Index lost 2.6 per cent to 773.67 at 8:05 am in London. The gauge, which is trading below its 50-day moving average since November, tumbled 17 per cent in 2015, the worst annual slump since 2011. The measure is trading at 10.8 times its 12-month projected earnings, a 31 per cent discount to the MSCI World Index.
All 10 industry groups in the developing-nation stocks index slid, as a measure of technology shares slumped 3.1 percent. Samsung Electronics Co. dropped 4.4 per cent in Seoul, while Taiwan Semiconductor Manufacturing Co. lost 2.5 per cent in Taipei.
In China, the $7.1 trillion stock market is starting the year on a down note. Policy makers, who went to unprecedented lengths to prop up stock prices during a summer rout, are trying to prevent financial-market volatility from weighing on economy set to grow at its weakest annual pace since 1990.
An earlier 15-minute halt at the 5 per cent level in the CSI 300 did little to stop the retreat, with shares extending losses as soon as the market re-opened. The selloff came on the first day the circuit breakers took effect. Under the mechanism, a move of 5 per cent in the CSI 300 triggers a 15-minute halt for stocks, options and index futures, while a move of 7 per cent closes the market for the rest of the day. The CSI 300 of companies listed in Shanghai and Shenzhen fell as much as 7.02 per cent before trading was suspended.
Hong Kong’s Hang Seng China Enterprises Index dropped 3.6 per cent. The purchasing managers’ index edged up to 49.7 last month from a three-year low of 49.6 in November, the National Bureau of Statistics said Friday. The private Caixin China Manufacturing PMI index decreased to 48.2, down from a five- month high of 48.6 in November. Numbers below 50 indicate deterioration. The non-manufacturing PMI, meanwhile, rose to 54.4, the highest since August 2014.
Taiwan’s Taiex Index fell 2.7 per cent, while South Korean and Malaysia shares declined at least 2 per cent. Indian stocks sank 1.9 per cent after an index showed a contraction in the nation’s manufacturing for the first time in more than two years. Equity gauges in South Africa, Turkey, Qatar slid at least 1.4 per cent. Emaar Properties PJSC led Dubai shares to the steepest two-day loss since December 13.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, fell 0.4 per cent and was headed for its lowest close since April 2009. A gauge tracking 20 emerging-market currencies fell 0.4 per cent toward a record low. Malaysia’s ringgit and Indonesia’s rupiah weakened the most in three weeks as an escalation of tensions between Iran and Saudi Arabia bolstered demand for the dollar.
The rouble climbed 0.6 per cent as Brent crude gained as much as 3.3 per cent. Iran’s supreme leader Ayatollah Ali Khamenei warned of repercussions and protesters armed with rocks and firebombs attacked the Saudi embassy in Tehran on Saturday and set parts of the building on fire. The Middle East accounted for about 30 per cent of global oil output in 2014, according to the Energy Information Administration.
Turkey’s lira and South Africa’s rand slid at least 0.4 per cent. The won weakened 1.3 per cent after data showed South Korea’s exports dropped more than expected in a 12th monthly decline.
Vietnam’s dong was little changed after the central bank reduced the currency’s reference rate for the first time since August. The State Bank of Vietnam lowered the fixing by 0.03 per cent to 21,896 against the greenback on Monday, after saying over the weekend that it is moving to a more market-based methodology in setting the daily reference rate.
The offshore yuan declined 0.7 per cent as weak manufacturing data spurred speculation the central bank will guide the currency lower to help the economy. The yield on China’s 10-year sovereign bonds due October 2025 rose three basis points to 2.89 per cent, the highest level since December 21. In Indonesia, the yield on government notes rose one basis point to 8.77 per cent.