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London - Asian stocks and currencies fell, with the Korean won sliding to a five-year low, as China weakened the yuan’s fixing by the most in more than a month. Polish stocks and the rouble led a rally in central Europe as oil rebounded.
The MSCI EM Asia Index ended a two-day gain as Chinese shares in Hong Kong lost 1.2% after the People’s Bank of China cut the yuan reference rate by 0.16%. The won weakened 0.9% against the dollar on bets the central bank will cut interest rates. Equity gauges in Poland and Russia rallied at least 2.2% and the rouble strengthened for the second time this week as Brent crude advanced. Turkish assets climbed.
China’s yuan depreciation on Wednesday surprised some analysts and added to concern that the country’s slowdown was deepening, while an unprecedented jump in new loans fuelled speculation credit growth may pile risks on the nation’s financial system.
Energy producers rallied in emerging Europe as Iran and Iraq prepared to meet and discuss backing a proposal by Saudi Arabia and Russia to freeze production at near-record levels.
“The Chinese authorities are working hard to prevent sharp moves in the yuan, but the news from China is still worrying,” said Maarten-Jan Bakkum, a senior strategist at NN Investment Partners in The Hague with about $206bn under management.
“Yesterday’s acceleration in credit growth means the country’s debt dynamics are becoming even more unsustainable.”
Bakkum said he prefers investing in stocks in India, Mexico, Philippines, Indonesia, Chile and Argentina.
The MSCI Emerging Markets Index fell less than 0.1% to 730.89 by 11:39 in London. A gauge tracking 20 developing-nation currencies climbed 0.1%, while the premium investors demand to own emerging-market debt over US Treasuries narrowed one basis point to 483, according to JPMorgan Chase & Co. Indexes.
