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Hong Kong - Emerging market stocks fell to the lowest level since 2009 as concern grew about faltering global economic growth and a slump in oil prices dragged down energy producers. China’s offshore yuan gained.
Stock indices in Vietnam, Pakistan and the Philippines led the drop as the MSCI Emerging Markets Index sank for a third day. Chinese shares in Shanghai rebounded after they fell into a bear market for the second time in seven months on Friday. Taiwan’s biotechnology shares surged the most since 2012 on speculation president-elect Tsai Ing-wen will increase funding in the industry to bolster economic growth. The yuan advanced in Hong Kong after mainland authorities stepped up efforts to curb speculation against its currency beyond its borders.
More than $2trn has been sliced from the value of emerging market equities as a worsening commodities rout and anxiety over China’s management of its slowing economy sap risk appetite. China will on Tuesday report a slew of economic data, including fourth-quarter gross domestic product. Brent oil traded below $28 a barrel after international sanctions on Iran were lifted, paving the way for increased exports from the Opec producer.
“China and oil are among the biggest risks for markets this year,” Agus Yanuar, President Director at PT Samuel Aset Manajemen, said in Jakarta. “I would remain defensive for now and watch how much further the market will retreat.”
The MSCI Emerging Markets Index lost 0.4% to 706.44 at 14:45 in Hong Kong, poised for the lowest level since May 14, 2009. The slide dragged its 14-day relative strength index to 19.4, the lowest since August and below the 30 level that some analysts say signals a rebound is imminent. The gauge has fallen 11% this year and been trading below its 50-day moving average since late November.
Developing nation stocks trade, on average, at 10.2 times projected 12-month earnings, a 29% discount to advanced- country shares in the MSCI World Index, according to data compiled by Bloomberg.
Stocks
Seven out of 10 industry groups in the emerging-markets measure declined, led by energy companies. Cnooc, China’s biggest offshore oil and gas producer, slumped to the lowest level since 2009 in Hong Kong.
Pakistan’s shares sank 3.2%, poised for the lowest close since March 30. Vietnam’s stocks fell 3.9% towards a 13-month low, as energy companies retreated and foreign selling accelerated before a leadership reshuffle from later this month. Vietnam starts the process of picking its new leaders this month, with the party congress starting in January 20.
The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong sank 0.7% to a four-year low. The Shanghai Composite Index rose 0.5% after a home-price recovery spread to more cities and speculation grew equities were oversold after the benchmark gauge entered a bear market last week.
In Taiwan, a gauge of biotechnology and medical-care companies in the Taiex index jumped 3.9%, the biggest gain among 28 industries. The benchmark index added 0.6% as the rally in healthcare shares overshadowed losses for financial companies.
Tsai, who won this weekend’s presidential election in a surprise landslide for the Democratic Progressive Party, said last month that she would boost Taiwan’s economy by focusing on five industries - biotechnology, green technology, smart machinery, Internet of Things and national defence. In November, she named a researcher in epidemiology and genomics, Chen Chien- jen, as her running mate.
Abu Dhabi shares climbed 2.2% from the lowest close since November 2013 to lead Persian Gulf markets higher. Equities in Dubai and Qatar gained at least 1.3%.
Currencies
The offshore yuan strengthened 0.4%, building on its biggest weekly gain since October. The cost of borrowing yuan on a weekly basis in Hong Kong rose, while overnight lending rates fell. The People’s Bank of China said it will impose reserve- requirement ratios on yuan deposited onshore by overseas financial institutions from January 25, without saying what level would be used.
The ratios will be the same as are applied to mainland banks, currently 17.5% for major lenders, according to people familiar with the matter. Foreign central banks, sovereign wealth funds and international lending agencies will not be affected by any changes, PBOC said.
Indonesia’s rupiah and Malaysia’s ringgit weakened at least 0.2%, as a gauge of emerging-market currencies fell for a second day.
Bonds
China’s government bonds fell on concern a weaker yuan will spur capital outflows, impacting the availability of funds in the financial system. The PBOC sold a record amount of foreign currency in December, a report showed Friday, as the central bank stepped up yuan purchases to stem the currency’s slide. The yield on the 2025 notes climbed three basis points to 2.78% as of 11:09 in Shanghai after reaching an unprecedented 2.70% on Thursday, data from the National Interbank Funding Center and ChinaBond show.
