Emerging markets shares found their footing on Friday after being pummelled by the likelihood of more tightening by the US Federal Reserve, but were set to close out the third quarter with their biggest three-month decline in a year.
MSCI’s index of emerging market equities was up 1.0 percent, but declined by 3.5 percent for the July-September period.
Stocks in mainland China which were closed for a week-long holiday, and Hong Kong’s benchmark index have shed 4 percent and nearly 6 percent this quarter, respectively.
Bourses in Johannesburg and Warsaw also hit quarterly declines. On the other hand, Indian stocks were up 2.6 percent , while Turkish equities surged 44 percent in the last three months.
Emerging market assets also posted weekly declines as US Treasury yields rose following hawkish signals from the Fed. A jump in oil prices and growing troubles in China’s indebted property sector further hurt risk sentiment this week.
Debt funds saw outflows of $1.1 billion, while outflows in equity funds rose to $3 billion from $838 million the previous week, according to JP Morgan.
“The prospects of ‘higher for longer’ interest rates in the US accompanied by market concerns about the beleaguered Chinese property market do not bode well for demand for EM assets in the coming weeks and months,” said Piotr Matys, senior FX analyst at In Touch Capital Markets.
Investors are now looking out for data on US inflation later in the day for further cues on the Fed’s rate path.
Regional currencies rose 0.3 percent but posted 0.4 percent losses this quarter.
Retreating US government bond yields provided some support, with the South African rand firming 1.0 percent against the dollar. – Reuters
