Emerging-market shares headed for their first fall in nine days on speculation the securities were becoming too expensive after climbing to the highest since November.
Stocks in Turkey, Russia and Vietnam led losses as concern revived that Britain’s exit from the European Union, an economic slowdown in China and political unrest in Turkey will curtail global growth. Most developing-nation currencies weakened against the dollar, paced by the Malaysian ringgit, Mexican peso and South African rand.
“The rally in emerging-market equities has been overdone and investors are starting to look at the reality on the risk of economic conditions in China and the financial industries in Europe,” said Jeffrosenberg Tan, an associate director at PT Sinarmas Sekuritas in Jakarta. “Countries like Indonesia, India and the Philippines should perform better due to their dependencies on domestic growth.”
Stocks
The MSCI Emerging Markets Index of equities fell 0.4 percent to 867.01 as of 9:01 a.m. in London after rising 6.2 percent in the previous eight sessions. The gauge climbed to 871.38 on Monday, the highest level since Nov. 4. The price-earnings ratio for its member companies based on projected earnings over the next 12 months has climbed to 12.3, the most since May 2015.
All of the 10 industry gauges fell, led by the energy and telecommunications firms. South Korean steelmaker Posco dropped 3.5 percent, China Unicom Hong Kong Ltd. fell 2.8 percent and Hyundai Steel Co. slid 2.5 percent.
Turkey’s benchmark stock index fell 0.8 percent, Russia’s slipped 0.9 percent and Vietnam’s slid 0.9 percent. Equity gauges in Indonesia and the Philippines rose by at least 0.6 percent.
Currencies
The MSCI Emerging Markets Currency Index fell 0.1 percent, extending its decline from an 11-month high set on July 14.
The ringgit dropped for a second day as crude oil prices fell. Asian currencies also weakened amid speculation central banks across the region will take more measures to stabilize growth amid an uncertain global outlook.
Minutes from the Reserve Bank of Australia’s July meeting released Tuesday showed policy makers kept their options open, while New Zealand’s central bank moved to rein in a housing boom, paving the way for lower borrowing costs.
The ringgit and the rand both slipped 0.7 percent, while the Mexican peso dropped 0.6 percent.
The Turkish lira approached a six-month low set on July 15, the day elements in the armed forces attempted to overthrow President Recep Tayyip Erdogan.
Moody’s Investors Service said Monday it would review Turkey’s Baa3 credit rating, the lowest level of investment grade, to “assess the medium-term impact” of the failed coup on the country’s growth and policy making institutions, according to a statement.
The lira dropped 0.3 percent to 2.9850 per dollar after depreciating to 3.0504 on July 15, the weakest level since January.
Source: Bloomberg
