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Jakarta - Developing-nation stocks pared the best quarterly performance since 2012 and currencies retreated as concern about the finances of Germany’s biggest lender curbed risk appetite.
The MSCI Emerging Markets Index fell for the first time in four days as financial stocks provided the biggest drag on the regional equities gauge. A measure of Chinese mainland companies traded in Hong Kong led declines, South Korea’s stock index dropped from a 14-month high and shares from Taiwan to the Philippines dropped.
Malaysia’s ringgit paced losses among emerging-market currencies, while India’s rupee rebounded.
Developing-nation assets are retreating as anxiety over the wider implications of Deutsche Bank’s capital troubles spread across global markets. Bloomberg News reported about 10 hedge funds doing business with the German lender have moved to reduce their financial exposure.
Better-than-expected US economic data bolstered bets the Federal Reserve will raise interest rates by year-end, sapping demand for higher-yielding assets.
“The likelihood of an interest rate increase in the US is getting higher after the latest delay, so we might have to deal with this in December,” said John Teja, a director at PT Ciptadana Securities in Jakarta. “The issues surrounding Deutsche Bank also give additional uncertainties for investors.”
John Cryan, chief executive officer of the German lender, has been struggling to convince investors that the bank has the funds to deal with legal bills tied to past misconduct, including a request for $14bn from the US Department of Justice.
Deutsche Bank shares have more than halved in value this year, while its default risk has soared.
Stocks
The MSCI Emerging Markets Index lost 0.6% to 907.68 at 07:15. The benchmark gauge has advanced 8.8% this quarter, buoyed by optimism that global central banks will sustain monetary stimulus.
The measure is set to post a fourth monthly advance, the longest winning streak since August 2014. Stocks on Thursday got a boost after OPEC’s preliminary agreement to cut production for the first time in eight years stoked demand for riskier assets.
All 11 industry groups in the developing-nations stock index decreased. China Construction Bank and Industrial & Commercial Bank of China fell at least 1.5% in Hong Kong.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong declined 1.2%, poised to trim its steepest quarterly advance since December 2014. Stock gauges in Korea, Philippines and Taiwan declined 0.9% on Friday.
Indonesian and Vietnamese stocks have risen more than 8% since the end of June, the best performers in Southeast Asia. Philippine shares are set to end the quarter with a drop of 1.9%.
Indian markets
India’s S&P BSE Sensex index was little changed on Friday and the rupee climbed 0.3%.
Stocks and the nation’s currency had the steepest drop in three months on Thursday after India said it attacked terrorist camps in Pakistan late on Wednesday in retaliation for a deadly strike against Indian soldiers earlier this month.
The MSCI Emerging Markets Currency Index declined 0.2%. The measure has gained 2% since the end of June, set for a third consecutive quarterly advance. The won weakened 0.2% on Friday, set to trim a 4.6% gain this quarter, the best showing in Asia, while the ringgit and Philippine peso are down at least 2.7%, the worst performers.
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