LONDON: Emerging market equities were on course for their fifth decline in six days on Tuesday and currencies weakened before two key central bank meetings, as a rally built on further stimulus hopes fizzled out.
MSCI's benchmark emerging equity index fell 0.6 percent on Tuesday as Russian stocks dropped 2.4 percent and shares fell on some Asian and Eastern European markets.
Chinese shares and Hong Kong equities closed higher after a turbulent morning.
Mainland indices slid more than 2 percent at one point. Investors in emerging markets are cautious before a two-day US Federal Reserve meeting that starts on Tuesday, with no change in interest rates expected, and a Bank of Japan meeting on Friday.
The Fed meeting has not caused as much anxiety as its September meeting, but markets remain volatile, said Cristian Maggio, the head of emerging markets strategy at TD Securities. "The Chinese rate cut on Friday hasn't produced a very positive effect on emerging markets," Maggio said.
"The People's Bank of China mentioned a few things that unsettled markets, so the market is focusing again on the possible downside risks to Chinese growth."
Several emerging market currencies also weakened. The Russian rouble slid 1.3 percent against the dollar to a three-week low as Brent crude oil futures fell towards $47 a barrel.
Russia's central bank will meet on Friday, and a slim majority of analysts expect the bank to leave rates unchanged.
The South African rand fell 0.4 percent as students protested rising university fees, a sign of the problems the country's economy faces.
The Turkish lira also slipped 0.4 percent before Sunday's parliamentary election. The AKP party is expected to fail once again to secure a majority.
Maggio said another hung parliament was the most likely outcome and investors had been "extremely complacent.
The risk is much bigger than what the market is pricing." Those who took tactical positive positions may start unwinding them before the vote rather than risk an unexpected outcome, he said.
The Polish zloty recovered from the nine-month low it had reached against the euro before this past Sunday's election. But the currency remained under pressure after a victory by the euro-sceptic Law and Justice party.
Hungary's forint slipped 0.13 percent against the euro as the central bank indicated the country's record low 1.35 percent base rate could be maintained until 2018 or even 2019.
On debt markets, Sri Lanka is selling a 10-year benchmark sovereign bond with initial pricing guidance for a yield of around 7 percent.
Sources close to the deal said the order book had already exceeded $1 billion in Asia.
Comments
Comments are closed for this article.