By 3 Minute Read* Chinese blue-chip stocks are down 1.2 percent * Morgan Stanley believes emerging market stocks are 2% off target* S&P lowers growth forecasts for some Asian economies* The Russian rouble is rising, and CS expects a 100 basis point interest rate hike. Reuters, June 29 – On Tuesday, a drop in Chinese stocks pushed an index of developing market stocks into the negative for the first time in five days, as mounting coronavirus cases dampened investor sentiment. The MSCI Emerging Markets Index declined 0.4 percent as Chinese blue-chip stocks tumbled more than 1%. Investors are also anticipating U.S. employment statistics, which might influence the Federal Reserve’s policy outlook. Virus fears have returned as a result of an increase in cases in Asia and Africa, among other places. Worries have been raised that efforts to stop the spread could jeopardize the global economic recovery. Morgan Stanley stated that emerging market stocks are 2% below their objective. S&P lowered its growth projections for some of Asia’s largest economies, including India, the Philippines, and Malaysia, on Monday, citing a sluggish vaccination deployment as the top risk for developing markets. According to the ratings agency, it could still take nearly two years for EM Asia to be vaccinated to 70 percent herd immunity. The rand of South Africa plummeted 0.3 percent, aiming towards early-May lows. Over the weekend, the country increased restrictions as the highly contagious Delta form, which was originally found in India, added to the country’s troubles amid delayed vaccination rollouts. According to the IMF, just about one adult in every hundred in Sub-Saharan Africa is fully immunized, compared to an average of over 30 in more affluent economies. here “The increased limits may result in a longer delay in policy normalization, as well as a slightly weaker currency,” Credit Suisse analysts wrote in a note. Investors priced in another rate hike next month for Russia’s rouble and bonds after the central bank governor stated on Monday that a boost of 25-100 basis points was being discussed. Credit Suisse expects a 100 basis point increase to 6.50 percent in July. This follows a 50-basis-point boost earlier this month, as well as a barrage of hawkish signals and steps by several central banks in emerging nations to keep inflation under control. The rouble has yet to recover to pre-pandemic levels, and it has lagged oil prices due to geopolitics. While the US expects for more stable and beneficial relations with Russia, Secretary of State Antony Blinken told a local newspaper that if Moscow continues to “attack,” Washington will retaliate. See tmsnrt.rs/2egbfVh for a GRAPHIC of developing market FX performance in 2021. See tmsnrt.rs/2OusNdX for a GRAPHIC on MSCI emerging index performance in 2021. FOR THE LATEST NEWS IN THE EMERGING MARKETS See the market report for CENTRAL EUROPE. See the TURKISH MARKET REPORT. See the RUSSIAN market report. Susan Mathew contributed reporting from Bengaluru, and Emelia Sithole-Matarise edited the piece. Continue reading
