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Kuala Lumpur - Emerging-market currencies and stocks dropped for a second day on speculation Federal Reserve policy makers meeting this week will signal they are still on course to raise interest rates, reducing demand for higher-yielding assets.
Malaysia’s ringgit dropped for a sixth session, the longest losing streak since November, as authorities in the US and Singapore investigate the funds of troubled state investment company 1Malaysia Development. Bank of Japan policy makers also meet this week. Shares in Taiwan led losses in Asian developing-nation equities, while those in the Philippines and Indonesia advanced.
“Investors are still cautious to take on riskier positions,” said Chris Eng, head of research at two units of Malayan Banking, which manages the equivalent of $6.1bn. “Investors are watching closely for more stimulus from global markets this week with the meetings in the US and Japan.”
Stocks
The MSCI Emerging Markets Index of shares dropped 0.1% as of 07:25 after declining 0.2% on Friday. Eight of the 10 industry groups fell. The gauge has still risen 9.3% this year and last week climbed to the highest since November.
South Korea’s OCI was the worst performer in the index after Shinhan Investment predicted earnings at the chemical manufacturer will slump by more than half next quarter. Shares fell 7.8%, the most in two months. South Korea’s benchmark Kospi Index fell for a fifth day.
Taiwan’s benchmark index dropped 0.9% while the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 0.6%. The Philippines’s key share index rose 0.8% and Indonesia’s gained 0.4%.
Currencies
Malaysia’s currency slumped to the weakest in a month as concern over 1MDB added to a drop in sentiment caused by lower oil prices.
US investigators said last week more than $3.5bn was taken out of 1MDB fraudulently and was spent on paintings, real estate and a Hollywood film, and at least $700m flowed into accounts controlled by a top Malaysian official whose description fits Prime Minister Najib Razak.
The ringgit fell 0.6% to 4.0815 per dollar after depreciating to 4.0920, the weakest level since June 28.
The MSCI Emerging Markets Currency Index dropped 0.1%. The gauge has declined 0.6% from an 11-month high reached on July 14.
“Asian currencies are down because of US dollar strength,” said Ho Woei Chen, an economist at United Overseas Bank in Singapore. “There is expectation of recovery in the US economy. The dollar is a key driver and any comments from the Fed will be very key to drive the dollar-Asian pairs.”
The yuan gained for a fourth day versus a basket of currencies, the longest run since May, as the central bank said it will keep the exchange rate stable.
The People’s Bank of China will work hard to keep the yuan stable against a basket of currencies, Deputy Governor Chen Yulu said at a conference in Beijing on Sunday.
The yuan advanced 0.04% to 6.6775 per dollar, according to China Foreign Exchange Trade System prices.
