April 17, 2024

Shares in Emerging Markets Hit a Two-Year Depth Due to Chinese Concerns

A measure of stocks in emerging markets has fallen by over 1% during trading on Friday. It was spearheaded by a position in the Chinese stock market. Some fiat currencies were also affected by the US Dollar as it gained more strength on the back of expectations that the US Federal Reserve would increase interest rates by some jumbo figure next week.

Bearing Global Weight

The MSCI index which monitors stocks from emerging markets dropped by 1.4%. It is the lowest level the index has been since 2020, and it is on track to register its third consecutive week of losses.

Shares in China dropped by over 2% little signs of the economy’s recovery became overwhelmed by another decline in the property market. The Chinese economy was slowed down by COVID restrictions.

Generally, stocks in the Asian market were in the red zone. A lot of currencies there also fell to low levels they had not suffered in many years. The Yuan, for example, was weakened beyond the benchmark of 7 Yuan to 1 US Dollar which has not been seen in over two years.

TD Securities Head of Portfolio, Cristian Maggio, said there are no clues for now that the economic show going on in China might come to an end any time soon. The market’s attention has been turned to the possibility of a global recession happening simultaneously, he said.

Currencies Drop to Many-Years Low

Note that shares in India also slid by 1% on Friday. Emerging market economies have come under intense pressure as investors run for cover under safe assets like the US Dollar in the wake of increased concerns that there would be a recession. Central banks have taken to increase the rate attached to borrowing as a means of fighting inflation.

Traders in the US economy are staking by as much as 75% that the Federal Reserve will increase interest rates by another 75 basis points during its policy meeting next week. The market also bets by 25% that the Feds will increase the rates by 100 basis points. The prolonged its rally into Friday as it makes for a full 1% increase for the week.

Currencies in emerging markets generally slipped by 0.4%. The Lira in Turkey dipped to its lowest point since last December as the Rand in South Africa dropped by 0.5%.

The market also has its attention on the policy meeting of the Russian central bank scheduled for Friday. It is speculated that the central bank might reduce rates again. It would be the fifth for the year as the Rouble dropped by 0.3% versus the Dollar.

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