Geopolitics in focus, China tech leads EM stocks lower despite policy easing – Reuters

  • China economic growth loses momentum – data
  • China cenbank unexpectedly cuts rates on policy loans
  • Russian rouble up, Moscow to hold talks with Germany
  • Turkey cenbank expected to hold interest rate on Thursday

Jan 17 (Reuters) – An index of emerging market stocks fell for a third straight session on Monday as China technology and property stocks slipped despite policy easing, and Turkey’s central bank meeting later this week and tensions over Ukraine were in focus.

Russia’s rouble inched up, last at 76.19 per dollar. Moscow is expected to hold talks with Germany this week amid concerns that Russia could invade Ukraine if diplomacy fails to meet Moscow’s objectives. read more

Ukraine’s hryvnia was near nine-month lows against the dollar, and dollar bonds continued to fall.

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“The rhetoric of the statements indicates a willingness to escalate, so the situation is likely to get worse before it gets better… In the coming days or weeks, geopolitics override solid fundamentals for the Russian rouble,” said Alex Kuptsikevich, senior financial analyst at FxPro.

Ukraine bonds slide
Ukraine bonds slide

A mixed bag of economic data from China showed the momentum of growth is slowing, prompting some market analysts to speculate that more easing may be coming after the central bank unexpectedly cut the borrowing costs of its medium-term loans on Monday. read more

While the monetary stimulus saw some buying in China stocks (.SSEC), (.CSI300), high-value tech stocks (.HSTECH) and the troubled property sector fell, dragging MSCI’s broader index of emerging market shares (.MSCIEF) 0.3% lower.

The Chinese yuan was buoyed by strong seasonal corporate demand ahead of the long Lunar New Year holidays, which begin at the end of the month.

Investment group Ashmore (ASHM.L) said on Monday that weakness in emerging markets over the last three months of 2021 led to a further decline in assets. read more

“However, the global macro economic environment is expected to be more supportive for emerging markets in 2022,” Ashmore CEO Mark Coombs said, citing U.S. interest rate hikes already priced in, monetary and fiscal stimulus supporting China’s growth and commodity prices providing a tailwind to terms of trade.

Most bourses elsewhere rose, with Turkey’s BIST index (.XU100) up for 11 straight sessions after a currency crisis-led slump.

Turkey’s lira edged up 0.4%. The central bank is expected to keep the key interest rate unchanged at 14% after 500 basis points of cuts since September. read more

Turkey’s annual inflation stands at 36% as of December, and is seen rising further in coming months before declining to around 27% by the end of the year, a Reuters poll showed. Finance Minister Nureddin Nebati said annual inflation rate will be in single digits by mid-2023. read more

For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX

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Reporting by Susan Mathew in Bengaluru; Editing by Timothy Heritage

Our Standards: The Thomson Reuters Trust Principles.

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