Shanghai - Emerging-market stocks headed for the steepest slump in two years and currencies weakened as a deepening rout in Chinese equities spurred concern the fallout will spread, damping demand for riskier assets.
The Shanghai Composite Index sank 5.9 percent on concern government measures to stem declines is failing as traders unwind margin bets at a record pace. Hong Kong’s Hang Seng China Enterprises Index plunged the most since 2008 after entering a bear market Tuesday. Taiwan shares tumbled three percent after exports trailed estimates. Currencies in South Korea, South Africa and Turkey lost at least 0.4 percent versus the dollar.
The MSCI Emerging Markets Index dropped 2.8 percent to 904.55 at 3:02 p.m. in Hong Kong, its sixth day of declines. About 43 percent of China’s stock market is frozen after about 1 300 companies suspended their shares amid a rout that’s wiped out more than $3.5 trillion of value. European leaders set a Sunday deadline for Greece to accept a rescue to avoid an exit from the euro currency area.
“China is adding more volatility to the mix,” said Robert Ramos, chief investment officer of Union Bank of the Philippines, which manages about $775 million in assets. “We will be seeing more of this flight to quality like to the U.S and investors sitting on their hands until the volatility caused by China and Greece dies down.”
Fed Rate
With Federal Reserve meeting minutes due Wednesday, the Greek turmoil and the slump in Chinese shares have prompted some investors to push back estimates for when US interest rates may rise. The Fed will delay raising rates until next year, a Morgan Stanley index shows.
The developing-nation gauge has fallen 5.2 percent this year and trades at 11 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 0.7 percent in 2015 and is valued at a multiple of 16.
The Shanghai Composite sank to a three-month low. The latest attempts to contain the slump, which include a wave of Chinese companies halting trading in their shares and regulators unveiling measures to prop up the value of small-cap stocks, have so far failed to revive investors’ confidence.
At least 1 301 companies have halted trading on mainland Chinese exchanges, locking up $2.6 trillion of shares. The Hang Seng China Enterprises gauge tumbled 7.1 percent as Industrial & Commercial Bank of China and Bank of China dropped more than 7 percent.
All 10 industry groups in MSCI’s developing-nation gauge fell, led by financial and technology shares. Huatai Securities and Citic Securities tumbled at least 10 percent in Hong Kong. Tencent Holdings, a Chinese Internet company, decreased 7.4 percent.
The Taiex Index slid the most since June 2012, led by a 1.8 percent loss in Taiwan Semiconductor Manufacturing. Data Tuesday showed Taiwan’s shipments dropped the most since 2013 last month. Indian stocks retreated 1.7 percent, while equity indexes in South Korea, Vietnam and the Philippines lost at least 1.1 percent. The won weakened for a third day.
Bloomberg