Wednesday, January 26

Emerging market stocks slide on Chinese tech losses, SA rand leads FX gains

Emerging market stocks fell near a one-year low on Monday, following losses in major Chinese tech stocks, while the South African rand rose on the first signs that the Omicron variant of the coronavirus may be causing infections in largely mild.

The rand added 0.6% to the dollar, leading gains in Europe, the Middle East and Africa (EMEA) after anecdotal reports suggested that Omicron may be causing less severe clinical symptoms than other variants of the coronavirus.

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But doctors and experts cautioned that more research is needed before any definitive conclusions can be drawn.

Concerns over the new variant had caused markets to swell over the past week as investors feared further tightening activity, while uncertainty over an aggressive Federal Reserve also weighed on sentiment.

The MSCI index of emerging market (EM) equities sank 0.7% Monday to 1,215.86 points, just a few points above the one-year low of 1,180.54 reached last week.

China’s Baidu and Alibaba Group, which are among the largest emerging market stocks, plunged more than 5.5% each after the decision by ride-sharing company Didi Global Inc to pull out of the New York Stock Exchange. last week it sparked jitters over major US-listed Chinese stocks.

Didi’s move comes amid a major crackdown by the Chinese authorities against major tech companies this year. China’s securities regulator said on Sunday that Beijing’s recent policy measures were not aimed at specific industries or private firms, and were not necessarily tied to companies seeking to list in foreign markets.

“China’s problems have not gone away and despite reassuring words from various state bodies about the Chinese company’s listing in the United States over the weekend, the nerves around Chinese great technology will continue,” wrote Jeffrey Halley, OANDA’s senior market analyst in a note.

Internet giant Tencent, the third of the trio of so-called “BATs” fell more than 3%, as heavy technology losses on Wall Street also spread to broader markets.

Indebted real estate developer China Evergrande plunged about 20% after it said there was “no guarantee” it would have sufficient funds to meet debt payments. China’s Guangdong province convened the Evergrande president on Friday.

Most EMEA stocks posted small movements. But Russian stocks fell more than 1% ahead of talks between Russian President Vladimir Putin and his American counterpart Joe Biden on Tuesday.

Emerging market currencies also held steady as investors waited for more clarity on the Omicron front, while holding onto safe havens like the dollar and yen.

The Turkish lira was the worst performer in EMEA, sinking 0.3% in choppy trading as concerns over monetary policy showed no signs of easing.

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