Publications
Partners
Jakarta - Emerging-market stocks sank to the lowest level since 2011 and a gauge of currencies slumped to a record as the plunge in China’s yuan spurred concerns that the slowdown in the world’s second-biggest economy is deepening.
Indonesian shares tumbled to an 18-month low as the rupiah weakened the most this year. Hong Kong’s Hang Seng China Enterprises Index lost 2%. The yuan dropped 1.9% in domestic trading after a 1.8% slide on Tuesday.
Equity gauges in South Africa, Dubai and Malaysia fell at least 1.7%. The ringgit sank beyond 4 to the dollar for the first time since 1998. The rouble declined 1%.
The MSCI Emerging Markets Index slid 1.6% to 864.60 at 10:10 in London, extending losses from its September peak to 22%. China’s central bank cut its reference rate by a record 1.9% on Tuesday and lowered it by 1.6% on Wednesday.
Vietnam widened the dong’s trading band, raising the risk that the yuan’s drop would trigger more competitive devaluations to boost faltering exports.
“The re-enactment of a currency war scenario has spooked already fragile sentiments,” Christopher Wong, a Singapore- based senior investment manager at Aberdeen Asset Management, said by email.
“Cash is a natural hiding space but given the dichotomy of fortunes with US markets, it does present a good buy opportunity for investors, especially solid companies. We would be looking to buy selectively.”
Stock valuations
The developing-nations gauge has retreated 9.9% this year and trades at 11 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has risen 1.8% in 2015 and is valued at a multiple of 16.2.
The Jakarta Composite Index tumbled 3.3%. The rupiah fell 1.4% as China’s devaluation put pressure on Asian currencies. Indonesian President Joko Widodo picked former Bank Indonesia Governor Darmin Nasution as the new economy minister in a cabinet shakeup aimed at rejuvenating growth.
The FTSE Bursa Malaysia KLCI Index dropped toward the lowest level since December 2012 and the ringgit sank 1.8%. The weaker yuan lumped more pressure on the ringgit already hurt by a slowing economy and controversy over finances linked to Prime Minister Najib Razak.
A Bloomberg gauge of 20 most-traded emerging currencies fell 0.2%, extending Tuesday’s 0.7% drop.
The rouble weakened to a February low and South Africa’s rand lost 0.3%. Dubai’s DFM General Index fell the most since June 28. Oil extended its drop after closing at a six-year low. Turkey’s Borsa Istanbul 100 Index fell 1%.
All 10 industry groups in MSCI’s developing-nations gauge declined, led by financial and utility companies. The Hang Seng China Enterprises gauge sank the most since July 27, paced by a 2.9% slide in China Life Insurance.
The Shanghai Composite Index fell 1.1%. Data on Wednesday showed China’s industrial production in July expanded less than analysts estimated.
China Southern Airlines and Air China posted their biggest two-day declines since April 2009 in Hong Kong, as the cheaper yuan boosts the cost of servicing dollar-based debt.
