LONDON: Emerging markets were at the centre of another global rout on Wednesday, with shares tumbling to 6-1/2 year lows and a number of major currencies, including Russia's rouble, teetering near all-time troughs.
MSCI's 23-country EM share index plunged more than 2.6 percent as the latest dive in oil prices spooked markets again and took the index's drop since the start of the year past 12 percent.
The bears spared no-one. Russia, which earns much of its revenues from oil, saw the rouble slide beyond 80 to the dollar and the South African rand, Mexican peso, Korean won and Turkish lira all fell sharply against the U.S. currency.
"The pressure on emerging markets is here to stay," said Aroop Chatterjee, a director of research at Barclays in London.
He said the dollar's strength was no longer about bets on higher U.S. interest rates but rather the protection it offers in times of turbulence.
"This is a very different kind of dollar rally and in this new world it is emerging markets that bear the brunt," he said.
The premium investors demand to hold emerging market government bonds rather than ultra-safe U.S. treasuries also widened again as their toughest start to a year since the height of the global financial crisis continued.
The Institute of International Finance, an authoritative source of data on investment flows, delivered more gloomy news too. It said it expected investors to pull another $450 billion of capital out of EM this year, having yanked $735 last year.
The latest slump in oil, this time towards $27 a barrel, sent Russian shares spinning downwards with the rouble. Saudi Arabia's main stock market plunged 4 percent to completely erase what had been its best day in almost five months on Tuesday.
Asia trading had seen the Hong Kong dollar fall to a more than eight-year low and Malaysia's ringgit and others all fall as China's sluggish economy and a weak yuan continued to dent their appeal.
Regional stocks also lost ground. China's equities closed down more than 1 percent despite trader chatter that Beijing might look to inject more stimulus into its economy and markets ahead of the Lunar New Year holidays in early February.
Central and eastern Europe was also red across the board. Near 2 percent falls in both Poland > and the Czech Republic kept the MSCI CEE index at its own 6-1/2 year low, while Poland's zloty hovered near a more than 13-year low against the dollar.
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