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Mumbai - Emerging-markets stocks headed for a six-year low as Apple suppliers tumbled and China’s move to lower its daily fixing for the yuan pummelled developing-nation currencies. The Won slid after North Korea said it successfully tested a hydrogen bomb.
Technology companies were the biggest decliners in the MSCI Emerging Markets Index as Taiwan’s Largan Precision paced losses for Apple suppliers after a report the US company will cut production of its latest iPhones. China’s CSI 300 Index gained amid government efforts to shore up the share market after the worst start to a year on record. The won dropped to the lowest level in three months.
The offshore yuan slid to a five-year low as a gauge of developing-nation currencies fell to a record.
The People’s Bank of China lowered its daily fixing by 0.22% to the weakest level since April 2011, spurring concern that the government is facing pressure to devalue its currency to revive growth in the world’s second-biggest economy. That’s raising the risk that developing nations will have to weaken their currencies to stay competitive.
“A weaker yuan could initiate other Asian markets to allow their own currencies to weaken to remain competitive with Chinese exports,” said Nescyn Presinede, a trader at Manila- based Rizal Commercial Banking, which manages $1.8bn in trust assets. “A continued weakening in the yuan could trigger more volatility in financial markets. Other Asian markets will not stand still from a weaker yuan.”
The MSCI Emerging Markets Index slid 0.7% at 12:30 p.m. in Hong Kong, poised for the lowest since July 2009. The measure’s 14-day relative-strength index slid to 29, below the level of 30 that some traders see as a signal a market is set to rebound. The gauge traded at 10.8 times its projected 12-month earnings, lower than its one-year average of 11.6. The MSCI World Index is valued at a multiple of 15.4.
Stocks
Eight out of 10 industry groups in the MSCI’s developing markets gauge retreated as a measure of technology companies tumbled to the lowest level since September 30. Largan and Catcher Technology slumped more than 9% in Taipei, sending Taiwan’s Taiex index toward the lowest close since August 27, after Nikkei Asian Review reported that Apple would reduce the first quarter output of its latest iPhones by about 30%.
China’s CSI 300 gained 0.4% after changing direction about five times. Policy makers revived intervention in the $6.5trn market this week as state-controlled funds bought equities on Tuesday after a 7% plunge on January 4 and the securities regulator signalled a selling ban on major investors will remain beyond its January 8 expiration date, according to people familiar with the matter.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong fell 1.1%. China Vanke, the developer whose shares were halted last month amid a battle for control with its largest shareholder, plunged 11% after resuming trading in Hong Kong.
South Korea’s Kospi index fell 0.6%, heading for the lowest close in four months. Indonesian equities climbed 1.2%, poised for the highest close since October 27.
Currencies
The yuan fell 0.5% in Hong Kong’s freely traded market as well as in Shanghai, with both exchange rates sinking to their weakest levels since at least April 2011. The offshore rate fell to a record 2.2% discount to the onshore one prior to the start of Wednesday trading in Shanghai, before the spread narrowed to about 2%.
A gauge tracking 20 emerging-market currencies fell 0.2%, its fourth day of losses. The ringgit weakened 0.7% to a seven-week low as China’s cut in the yuan’s fixing fueled concern that a slowdown in the region’s biggest economy will crimp demand for Malaysian exports.
The won fell 0.7% to the weakest level since September. North Korea said it successfully tested a hydrogen bomb, the fourth time it has detonated a nuclear device and a move that dramatically escalates tensions on the peninsula with neighbours South Korea and Japan. The regime in Pyongyang detonated a hydrogen device for the first time at 10 a.m. local time, its official Korean Central News Agency said. The explosion was initially detected as a magnitude 5.1 earthquake by the US Geological Survey.
Bonds
The yield on China’s 10-year sovereign bonds due October 2025 rose two basis point to 2.91%, the highest since December 18. Korean 10-year debt advanced, pushing their yield down one basis point to 2.05% while Indonesian bonds were little changed.
