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Taipei - Emerging-market stocks fell and most currencies weakened as bomb blasts in Belgium spurred demand for havens and analysts weighed prospects for higher US rates.
Shares in South Africa and Turkey led declines, falling from the highest levels in 4 1/2 months while currencies including Indonesia’s rupiah and Turkey’s lira retreated at least 0.4%. Hungary’s forint slid after the central bank unexpectedly cut its benchmark rate.
The extra yield investors demand to hold emerging-market bonds widened for the first time in four days. China’s stocks snapped a seven-day rally, the longest winning streak since May.
Assets in emerging Europe and Africa slid after reports of explosions at a Brussels airport departure hall and a downtown subway station on Tuesday morning boosted demand for haven assets. In Asia, the rally showed signs of petering out after two Federal Reserve officials floated the possibility of a rate increase as soon as April.
“If we get more of these kinds of signals from the Fed it will have an impact, but it would be a bit strange to see the Fed signaling a new path so soon” after last week’s meeting, said Anders Svendsen, an emerging-market analyst at Nordea Bank in Copenhagen. “There will be a lot of ups and downs in this first half of the year with sentiment trying to find its feet and many uncertainties out there.”
Svendsen said he expects currencies to strengthen this year as they are “significantly” undervalued.
In the US, exchange-traded funds that invest in emerging markets received a net $587.1m of capital inflows on March 21, according to data compiled by Bloomberg, bringing the total in the past five days to $2.8bn and leading net inflows among such funds.
Stocks
The MSCI Emerging Markets Index declined 0.2% at 15:05, following a four-day run of gains that saw it rise 4.9% and enter a bull market on Friday. The MSCI gauge for emerging Europe, the Middle East and Africa sank 1.4%.
“We do not think the first quarter EM rally has initiated a period of sustained outperformance by emerging-market equities,” analysts at Barclays including Ajay Rajadhyaksha said in an emailed note. “We are skeptical that the first quarter rally in commodities, in particular oil, will persist into the second quarter,” they said.
The Borsa Istanbul 100 Index slid 2%, heading for the biggest drop in six weeks. South Africa’s benchmark gauge declined 1.5% and the Shanghai Composite Index retreated 0.6%.
Russia’s Micex Index slid 0.8%, after climbing 0.6% while futures on Brazil’s equity-index dropped 0.9%.
Currencies
A Bloomberg gauge of 20 emerging-market currencies slipped 0.1%, falling for a third day in the longest slump in six weeks. The lira and the rand both dropped 0.5% while the rupiah slid 0.4%.
The forint dropped 0.6% against the euro. The National Bank of Hungary cuts its key interest rate to 1.2% from 1.35%.
The offshore yuan declined as China’s central bank lowered its reference rate for a second day, stoking speculation the authorities judged previous gains in the currency excessive amid a slowing economy. The People’s Bank of China cut the fixing by a combined 0.53% on Monday and Tuesday, the biggest two-day reduction since January. The onshore yuan has gained 1.3% in the past two months, rebounding from its biggest annual decline in two decades.
Malaysia’s ringgit rose to a seven-month high after the Edge Financial newspaper said state-investment company 1Malaysia Development may conclude the sale of its energy unit this week.
Bonds
The premium investors demand to own emerging-market bonds over US Treasuries rose three basis points to 399, according to JPMorgan Chase & Co indexes.
The yield on Turkish 10-year government bonds rose four basis points to 10.16%, while the rate on five-year ruble notes was unchanged at 9.12%.
