EM Review: Stocks Post Worst Rout in Year as Tech Shares Slump

(Bloomberg) -- Emerging-market assets came under pressure as investors adjusted positions following rallies earlier in November as the end of the year approaches. Equities had their worst week in a year as technology stocks got hammered, while currencies were steady.

Highlights for the week ended Dec. 1:

• The Bank of Korea raised its policy rate for the first time since 2011, while the central bank said it would maintain its accommodative stance as demand-driven inflationary pressures won’t be strong for some time
• North Korea “successfully” launched a new type of intercontinental ballistic missile with technology that can deliver a nuclear warhead anywhere in the U.S., state-run Korean Central News Agency said 
• Argentina’s credit rating was raised one level by Moody’s Investors Service as President Mauricio Macri’s macroeconomic reforms began to take hold; Moody’s raised the rating to B2 from B3 with a stable outlook
• Turkish businessman Reza Zarrab, who laundered billions of dollars on behalf of Iran, told a New York jury Thursday that a senior Turkish official said to him that Recep Tayyip Erdogan, who was prime minister at the time and is now president, personally signed off on a plan to involve two Turkish banks in the scheme
• Egypt’s main stock benchmark, the EGX 30, jumped to a record high amid optimism surrounding the country’s economic reforms

Asia:

• South Korea’s won retreated from a May 2015 high reached a day before the Bank of Korea lifted its policy rate to 1.5 percent from 1.25 percent on Thursday
• U.S. President Donald Trump discussed “next steps” on North Korea with South Korean President Moon Jae-in; Trump said after a phone call with Chinese President Xi Jinping that major new sanctions will be imposed
  • The U.S. demanded that China cut off all oil exports to North Korea after the country’s latest intercontinental ballistic missile test, warning that Washington will force action if Beijing fails to do so
• China’s official factory gauge unexpectedly increased as foreign and domestic demand helped cushion the effects of a pollution cleanup; the November manufacturing PMI came in at 51.8 vs est. 51.4
• India’s rupee rose during the week as data showed economic growth bounced back from a three-year low, giving the central bank scope to hold its policy rate on Dec. 6 amid an uptick in inflationary pressures; gross domestic product expanded 6.3 percent year-on-year in the third quarter, slower than the 6.4 percent median estimate in a Bloomberg survey but faster than 5.7 percent in the previous three months

EMEA:

• Turkey’s lira had its biggest weekly gain since August; the central bank could raise its late-liquidity window without a monetary policy committee meeting “if inflation expectations worsen,” a senior adviser to President Erdogan said; Erdogan said 2017 GDP growth may be around 7%
  • Turkey is on course to dodge a potential inclusion in the European Union’s list of tax havens, after offering additional clarifications
• South Africa’s rand led gains in emerging markets after Moody’s refrained from joining S&P Global Ratings in cutting the nation’s local-currency debt rating to junk; Nkosazana Dlamini-Zuma’s bid to lead South Africa’s ruling African National Congress after her ex-husband, President Jacob Zuma, steps down as party leader in December received a boost when a majority of branches from one of the nation’s nine provinces endorsed her
• Russian officials said they’re not worried about possible new U.S. sanctions on the country’s sovereign debt, although economists aren’t convinced
  • At the same time, Russia’s Finance Ministry has hired banks to organize its first-ever sale of yuan bonds as the government prepares for possible penalties
  • Liberal opponents of President Vladimir Putin have filled local councils in the Russian capital’s historic and commercial core, as well as a few upmarket residential areas, attaining majorities in 17 of the city’s 125 municipal districts
• Kenya’s government is seeking proposals from banks about a possible $2 billion Eurobond offering in the first quarter of 2018, according to two people familiar with the matter
• Saudi Arabia raised 6.68 billion riyals ($1.8 billion) from the sale of Islamic debt to local institutions

Latin America:

• Mexican Finance Minister Jose Antonio Meade resigned on Monday to formally seek the presidential nomination of the ruling Institutional Revolutionary Party
  • President’s office sends statement naming Alejandro Diaz de Leon to replace Agustin Carstens as head of Banxico
• Brazilian government is said to allow pension vote only in 2018, O Globo reported; the government has cut its pension reform proposal “to the bone” and can’t grant other concessions, Cabinet Chief Eliseu Padilha said
• The Chilean peso dropped by the most among developing currencies as copper prices fell; the Colombian peso also declined as a Nov. 24 rate cut weighed on the currency due to less attractive carry
  • Colombian interest rates should fall “with caution,” central bank Governor Juan Jose Echavarria said

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To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net, Justin Villamil in New York at jvillamil18@bloomberg.net, Alex Nicholson in Moscow at anicholson6@bloomberg.net.

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Rita Nazareth at rnazareth@bloomberg.net, Andrew Janes, Alec D.B. McCabe

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