Investors sit in front of an electronic stock board at a securities brokerage in Shanghai, China.(Photographer: Qilai Shen/Bloomberg)

Emerging-Market Stocks Were Pummeled This Week

(Bloomberg) -- The selloff pummeling emerging market currencies shifted to stocks as contagion concerns weighed on risk assets and President Donald Trump threatened to impose tariffs on an additional $267 billion of Chinese goods. MSCI Inc.’s EM equities gauge entered a bear market on Sept. 6 and had its worst week since mid-August.



MSCI EM stocks index-3.12 percent
MSCI EM FX index-0.53 percent
Bloomberg Barclays Global EM Local Currency bond index-0.96 percent

Highlights for the week ended Sept. 7:

  • A public consultation period on a U.S. proposal for tariffs on an extra $200 billion of Chinese imports ended Thursday; far from backing down though, President Trump threatened to tax another $267 billion of Chinese goods "on short notice"
    • China will be forced to retaliate if the U.S. pushes ahead with additional tariffs, said Gao Feng, a Ministry of Commerce spokesman
  • Trump’s efforts to force Canada into signing a new Nafta agreement on his terms faced new hurdles amid growing domestic opposition to his threat of proceeding without the U.S.’s northern neighbor
    • Mexican Economy Minister Ildefonso Guajardo said there won’t be an agreement on Nafta until Canada completes talks
  • Trump will skip two major summits in Asia in November, a move that could stoke concerns in the region about the U.S.’s reliability as a counterweight to China
  • South Africa’s rand was the worst-performing EM currency as second-quarter growth data showed the nation unexpectedly fell into its first recession for almost a decade; the economy shrank an annualized 0.7 percent last quarter
    • The ruling African National Congress is worried the recession could trigger further credit-rating downgrades, said Enoch Godongwana, the party’s head of economic policy
  • The Russian ruble had its worst week in a month as the U.S., Canada and a bloc of European nations joined the U.K. in saying a nerve agent attack on a former Russian agent living in England was “almost certainly” approved by the Kremlin; Russia said it had nothing to do with the attack
  • The Turkish lira rallied most among emerging-market currencies as the nation’s central bank signaled higher interest rates are in the offing after inflation rose more than forecast in August and producer prices surged; inflation accelerated to 17.9 percent and producer prices climbed more than 32 percent
  • Argentina’s Merval Index jumped 1.8 percent; central bank governor Luis Caputo saw more calm ahead in the peso market as the government’s financing is guaranteed through 2019
  • Brazil’s largest stocks ETF and international bonds trading offshore gained on Friday
    after far-right presidential candidate Jair Bolsonaro, who leads opinion polls before the vote in October, was stabbed at a rally
    • The near-fatal attack may boost the popularity of Bolsonaro, who’s free market credentials have been welcomed by investors, top forecaster says
    • Local markets were closed on Friday for holiday
  • The Philippines Stock Exchange Index had its biggest weekly drop since late June amid growing speculation the central bank will hike interest rates on Sept. 27 after the inflation rate climbed to a nine-year high of 6.4 percent in August
  • Indonesia’s Jakarta Composite Index tumbled as the rupiah fell to its weakest level since 1998; Bank Indonesia is introducing more hedging tools to help shield the currency from further weakness, said Nanang Hendarsah, executive director for monetary management
Emerging-Market Stocks Were Pummeled This Week


  • Chinese yuan declined for a second week, both onshore and offshore; factory output in Guangdong province -- China’s largest regional economy -- weakened in August, a PMI showed, raising questions about the resilience of the nation as it digs in for a prolonged trade battle with the U.S.
  • North Korean leader Kim Jong Un signaled he wants to “achieve denuclearization” during President Trump’s first term during meetings with South Korean officials, but America’s top diplomat indicated more work may need to be done
    • South Korean President Moon Jae-in and Kim will hold a summit Sept. 18-20
    • Former U.S. Defense Secretary Leon Panetta said Trump’s summit with North Korea leader Kim in June was “doomed to failure” because of a lack of preparation
  • South Korean won retreated, halting a 3-week winning streak; Trump said he has finished negotiating a new trade deal with the nation and may sign it at the United Nations General Assembly that starts this month
    • Trump and Moon intend to meet in late September at the assembly, National Security Adviser John Bolton says in tweet
    • President Moon’s approval rating dropped to a record low of 49% this week, a Gallup Korea poll showed
    • South Korea’s consumer prices rose 1.4 percent in August from the year before, in line with estimates; July’s current-account surplus was $8.76 billion versus June’s excess of $7.38 billion
  • Bank Indonesia bought 10.7 trillion rupiah ($719 million) of govt bonds from the secondary market in the previous five days, policy makers said Sept. 6, and has purchased 89.8 trillion rupiah of notes this year
  • Philippines has sufficient buffers to support its local currency even as its growing economy sustains strong demand for dollars, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said
  • Thailand’s SET Index completed its worst week since late June; the country’s inflation quickened to the fastest since September 2014 on an uptick in food and energy prices. The annual rate rose to 1.62 percent against forecasts of 1.51 percent
  • Malaysian ringgit extended a 12-week losing streak, the longest since 2015; the nation’s central bank kept its key rate unchanged at 3.25 percent, as forecast in a Bloomberg survey


  • South Africa’s government is putting the finishing touches to a package of structural reforms and stimulus to help revive an economy that’s now in recession; FTSE/JSE Africa All Share Index sank 2.7 percent, the most since March
    • The nation’s second-quarter current-account deficit narrowed from the biggest in two years as the trade balance swung to a surplus
    • The country intervened in setting fuel prices for September for the first time since the early 2000s as costs surged by more than inflation following a plunge in the rand
  • Turkish Treasury and Finance Minister Berat Albayrak said the nation doesn’t plan to seek IMF support, Reuters reported
    • Government named two deputies to Treasury and Finance Ministry
    • Coordination between Turkish and U.S. troops in the Syrian city of Manbij is being neglected, President Recep Tayyip Erdogan said
    • Turkey replaces prosecutor in U.S. pastor case, IHA reports
  • Russia’s central bank is setting the stage for an increase in interest rates as a weakening ruble fans inflation; annual price-growth accelerated to a one-year high of 3.1 percent in August
    • READ: Russia Ready to Buy Own Debt If Sanctions Spark Market Crash
    • The Kremlin is leaning on Russia’s oligarchs to spend $120 billion on new investments by the end of President Vladimir Putin’s term after shelving plans to hike taxes on big business
  • The Hungarian forint is among the best-performing EM currencies as data showed second-quarter GDP rose 4.8 percent on year, the most in more than 13 years and more than a preliminary estimate; growth may exceed the 4.3 percent goal in 2018, Finance Minister Mihaly Varga said
  • Polish zloty fell a second week; central bank governor Adam Glapinski reiterated his stance that the policy rate should be kept on hold until 2020 after it was left unchanged at 1.5 percent

Latin America:

  • Argentine peso trimmed weekly loss as International Monetary Fund Director Christine Lagarde told President Mauricio Macri that the IMF will expedite cash disbursement to the country
    • Argentina will impose taxes on exporters as it looks to balance its budget in 2019, a year earlier than planned
    • Treasury Minister Nicolas Dujovne said that talks with the IMF are advancing and the lender is likely to vote on a revised loan agreement by the end of September; the IMF said it’s moving quickly to present a funding proposal
  • Brazil’s leading presidential candidate Jair Bolsonaro tweeted he was "doing well and recuperating" after being stabbed on the campaign trail; Eurasia says Bolsonaro has 60% chance of reaching the second round after the incident
    • A Supreme Court judge rejected former President Luiz Inacio Lula da Silva’s request to suspend his ineligibility for the election
    • The Sao Paulo public prosecutor filed charges against former governor and presidential candidate Geraldo Alckmin for not having declared a 10-million reais ($2.5 million) donation from a construction company during 2014’s campaign, Jota reports, citing the lawsuit
  • Colombian peso declined a second week; the country’s inflation is trending in the "right direction," said central bank co-director Gerardo Hernandez; August CPI rose 3.1 percent on year, matching expectations
    • Carolina Soto, another central bank co-director, said she was not too concerned about the "temporary and manageable" drop in the peso and saw limited contagion to Colombia from turmoil in Argentina and Turkey
  • Chile’s swap rates surged, moving to price a 25bps hike in three months and 50bps rate increases in six months after the central bank raised its 2018 GDP growth forecast to 4-4.5 percent from 3.25-4 percent; the bank left its policy rate on hold at 2.5 percent on Sept 4

Upcoming data:

Monday, Sept. 10ChinaAug. consumer price index, producer price index
Turkey2Q GDP
Tuesday, Sept. 11Philippines, RussiaJuly trade data
South Africa, Mexico July manufacturing production
Argentina Monetary policy decision
Wednesday, Sept. 12IndiaAug. consumer price index, July industrial production
South AfricaJuly retail sales
Thursday, Sept. 13Turkey, Peru Monetary policy decision
BrazilJuly retail sales 
Friday, Sept. 14RussiaMonetary policy decision
ChinaAug. retail sales, industrial production, fixed-asset investment
TurkeyJuly current-account balance
IndiaAug. wholesale price index

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