Emerging-market stocks fell to the lowest level in more than four months and currencies weakened amid concern that slower Chinese growth and reduced Federal Reserve stimulus will spark more capital outflows.
The MSCI Emerging Markets Index dropped 1.5 percent to 935.81 as of 4:06 p.m. in Hong Kong on Monday, heading for the lowest close since Sept. 3. A Chinese measure in Hong Kong and equity gauges in Indonesia and the Philippines tumbled at least 1.8 percent, while the rupiah slumped for a sixth day versus the dollar and Turkey’s lira slid to a record. The cost of insuring Asian debt rose to the highest level in almost four months.
The combination of weaker Chinese manufacturing, political turmoil from Turkey to Thailand and the devaluation of Argentina’s peso has shaken investor confidence at a time when the Fed is scaling back the bond-buying program that had fueled inflows into emerging markets.
Foreign investors pulled about $481 million from South Korean shares and $566 million from Taiwanese equities on Monday, while trading volumes in Kuala Lumpur surged to 101 percent above their 30-day average.
“The growing turmoil in emerging markets is inflicting damage on risk assets across the board and no let up is expected in the near term,” Mitul Kotecha , the global head of foreign-exchange strategy at Credit Agricole Corporate & Investment Bank SA in Hong Kong, said.
The MSCI developing-nation gauge has fallen 6.6 percent this year and trades at 9.1times projected 12-month earnings, according to data compiled by Bloomberg. The MSCI World Index of advanced-nation shares has dropped 2.8 percent in 2014 and is valued at a multiple of 14.4.
Developing-market equity volatility has jumped the most in two years. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index rose 40 percent to 28.26 last week, the biggest increase since September 2011. Bearish bets outnumber bullish ones by the most since July on the underlying exchange-traded fund, with about 60 percent more puts than calls.
