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Emerging stocks slide most in three weeks as Trump leads

Singapore - Emerging-market shares headed for their biggest decline in almost three weeks after a poll showed Donald Trump leading Hillary Clinton in the US presidential election race, sapping demand for higher-yielding assets.

Developing-nation stocks and currencies both dropped for a second day amid concern Trump as president would scrap trade deals and penalize US companies that manufacture products overseas.

South Korea’s stocks fell and the won tumbled as President Park Geun-hye replaced her prime minister and finance minister as she sought to stem an influence-peddling scandal. Philippine shares slipped for an eighth day, extending their loss from a July peak to more than 10%.

“For the wider emerging markets, if Trump is going to renege or tear up trade accords or anything in the pipeline, then that’s not going to be good for global trade or emerging-market countries that are more trade reliant,” said Vishnu Varathan, a senior economist at Mizuho Bank in Singapore. “There’s a sense that he may be disruptive to an already weak global environment.”

The MSCI Emerging Markets Index of shares dropped 1% as of 09:06, the biggest decline since October 13. The gauge has fallen about 4% from this year’s high in September.

The Philippines benchmark index led losses on Wednesday, sliding 2.1% while Taiwan’s and South Korea’s both dropped 1.4%.

Korea rout

Korean assets slid after Park named Kim Byong-joon, a former policy adviser under Roh Moo-hyun’s administration, as prime minister and appointed a new finance minister. The reshuffle marks the president’s latest effort to restore confidence in her government as the scandal sends her approval ratings tumbling.

The Kospi index of shares slid for a fourth day, while the won dropped 0.8% after sliding as much as 1.1% to the weakest since July 14.

The Philippines benchmark stock index extended its daily losing streak to the longest in six months. Overseas investors pulled funds out of the country for a third month in October as President Rodrigo Duterte has criticized the US and said he wanted foreign troops out of the country in two years.

“Faced by a combination of external and internal issues, investors are taking a cautious stance,” said Nescyn Presinede, a trader at Rizal Commercial Banking in Manila. “Globally, there is uncertainty of the US presidential elections and the likelihood of a rate increase in December. At home, you have political noise.”

Trump ahead

US Republican presidential candidate Trump was one percentage point ahead of his Democrat rival Clinton in a ABC News/Washington Post tracking poll published on Tuesday.

The survey was released after Friday’s announcement that the Federal Bureau of Investigation had reopened its investigation into Clinton’s use of an unauthorized e-mail server.

A winding back of trade agreements by the world’s biggest economy would hurt emerging markets, many of which depend on exports of commodities to support growth. Trump has said he would revisit the North American Free Trade Agreement that governs commerce between the US, Canada and Mexico.

The Mexican peso weakened 0.6% after slumping 1.8% on Tuesday, which was the biggest decline in almost four months.

The MSCI Emerging Markets Currency Index dropped 0.2%. The Malaysian ringgit dropped 0.5% and the Russian ruble dropped 0.2%.

The Federal Reserve announces a policy decision on Wednesday, with economists projecting it will keep interest rates on hold this month before raising them at its December meeting.

“The lead of Donald Trump in the poll is just part of the reason for the decline,” said Andrew Sullivan, managing director for sales trading at Haitong International Securities in Hong Kong. “There are also a lot of other macro issues happening that worry people such as the Fed’s monetary policy decision.”

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