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Emerging stocks fall to six-week low on Paris attacks; won drops
[MANILA] Emerging-market stocks declined toward a six-week low and currencies weakened as the terror attacks in Paris spurred a selloff in riskier assets.
Philippine shares led the slide as the MSCI Emerging Markets Index sank for a second day. Asian airlines tumbled on concern tourists will cut back on travel to Europe, while tighter curbs on the use of borrowed money to buy Chinese shares dragged Hong Kong-traded mainland shares lower. South Korea's won slid to the lowest level in six weeks, pacing losses for currencies.
The MSCI emerging-markets gauge decreased 1.1 per cent to 812.23 at 12.34 pm in Hong Kong, extending the steepest weekly slide since September, as Europe's worst terror attack on Friday deepened concern that geopolitical tension will curb trade and slow global growth. The violence comes as the U.S. prepares to raise the near-zero borrowing costs that have supported demand for riskier assets in developing nations.
"The recent attack in Paris is making investors nervous as it shows terrorism is on the rise," says Rafael Palma Gil, who helps manage about US$1.8 billion as a trader at Rizal Commercial Banking Corp. in Manila.
"Before, this market was weak on anticipation that the US will raise interest rates. The global picture already isn't looking good and these attacks are adding to the negative market sentiment."
An index tracking 20 currencies in developing countries retreated for a third day. MSCI's emerging-markets measure has slumped 15 per cent this year, sending the gauge's 14-day relative strength index to 33.27, the lowest since Sept 7. A reading below 30 is a signal to some traders selling is overdone.
The Philippine Stock Exchange Index sank 2.5 per cent, the most in three months, as the prospect of higher interest rates in the US spurred foreign outflows.
The gauge has fallen for nine straight days, while foreign investors pulled a net US$65.8 million from the nation's shares last week, the most in two months. Taiwan's Eva Airways Corp tumbled 7 per cent, while China Southern Airlines Co and China Eastern Airlines Corp dropped more than 2 per cent on worries that the deadly terrorist attacks in Paris will deter tourists from traveling to the French capital.
French warplanes bombed Islamic State's nerve center in Raqqa after at least 129 people were killed in more than half a dozen locations in Paris. France said the deadly violence was directed from Syria and launched from Belgium. Islamic State said the Paris attacks were payback for France's military involvement in the Middle East.
Hong Kong's Hang Seng China Enterprises Index declined 1.9 per cent and the Shanghai Composite Index slid for a third day after officials moved to contain the rise in leveraged wagers on equities. Mainland stock exchanges cut by half the amount of borrowed money investors can use to buy shares, as authorities sought to prevent a repeat of the excesses that led a US$5 trillion rout.
SK Networks Co plunged 20 per cent in Seoul, dragging the Kospi index lower. Doosan Corp and Shinsegae Co surged after winning licenses to operate tax-exempt retail outlets in the South Korean capital. Shinsegae was awarded one held by SK Networks.
The won weakened 0.8 per cent versus the dollar, while Turkey's lira, Indonesia's rupiah and Malaysia's ringgit fell at least 0.5 per cent.