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Emerging stocks hit 17-month lows after Wall St sell-off

Equities in China, whose economic and trade prospects have been at the heart of worries this year over the outlook for global growth, sank to near-four year lows.

FILE: Picture: AFP.

BENGALURU - Emerging-market stocks joined a slide in global equities on Thursday, falling to 17-months lows as worries about growth and the future of a long-running US market rally undermined investors’ appetite for risk.

Equities in China, whose economic and trade prospects have been at the heart of worries this year over the outlook for global growth, sank to near-four year lows.

MSCI’s index of emerging market stocks fell about 3%, with the fall in Chinese stocks accompanied by sharp losses in Taiwan and South Korea.

“What we’re looking at is a knee-jerk reaction to an unexplained large fall in US equities,” said Koon Chow, EM Macro and FX strategist, at UBP.

The S&P 500 and the Dow Jones Industrial Average saw their biggest daily declines since 8 February on Wednesday, with rises in US bond yields, worries over rising interest rates and comments by US President Donald Trump on rates all feeding nerves.

Volatility in US stocks spiked to six-month highs, but Chow said he still believed the sell-off, as on several previous occasions over the past 18 months, would be short-lived and would make for a better buying opportunity in emerging markets.

“The US economy is in a strong shape, so the source of the contagion does not look worrisome,” he said.

Central European stock indices also dipped, with Budapest and Bucharest trading more than 1% lower.

However, MSCI’s index of emerging market currencies was steady against a weaker dollar, with Turkey’s lira firming.

Data showing Turkey’s current account deficit in August reversed to a surplus of $2.592 billion, from a $1.778 billion current account deficit in July, offered some sign that this year’s nearly 37% slide in the currency may be setting the economy straight.

India’s rupee weakened 0.2% to resume its slide, after snapping a five-session losing run on Wednesday. It is down about 14% this year, with rises in the global prices of oil, India’s biggest import, exacting a heavy toll.

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