LONDON, Sept 17 (Reuters) - Emerging equities fell over 1 percent on Monday in the wake of reports that the United States was about to announce a new round of tariffs on some $200 billion worth of Chinese imports, while Turkey’s lira once again led currency losses.
MSCI’s benchmark emerging stocks index was down 1.2 percent as investors braced for more measures in the ongoing U.S.-Sino trade war, with the Wall Street Journal reporting that Beijing may reject an offer of new trade talks if the U.S. moves ahead with its latest tariff round.
The new tariffs, reported to be set at 10 percent rather than the 25 percent Washington had earlier said it was considering, will cover internet technology products and other electronics, printed circuit boards and consumer goods.
“The tariffs are a bit lower than they could have been, but still enough to weigh on sentiment,” said Per Hammarlund, chief emerging markets strategist at SEB.
The Asian manufacturing economies took the brunt of the selling, with Chinese mainland shares down 1.1 percent and Hong Kong down 1.3 percent.
Indonesia lost 1.8 percent, with the country’s trade deficit larger than expected in August as export growth slowed.
Indian shares fell 1.1 percent and both countries’ currencies remained under pressure, with the Indonesian rupiah down around 0.7 percent and India’s rupee 0.9 percent. The rupee is Asia’s worst-performing currency against the dollar this year, down nearly 12 percent.
Late on Friday India announced measures aimed at stemming the fall, including cutting imports, easing overseas borrowing norms for manufacturers and relaxing rules around banks raising rupee-denominated overseas bonds.
The Turkish lira was the biggest daily faller, down 1.4 percent to levels hit prior to last Thursday’s hefty 625 basis point interest rate rise to 24 percent.
Investor focus is now turning to the damage to the real economy from Turkey’s financial shock, with the government’s medium-term economic plan due out on Thursday.
“The government needs to show they understand the consequences of the present lira crisis ... how much this impacts the broader macro picture and government finances,” said Hammarlund.
“They need to show they are realistic about their budget assumptions for next year. Otherwise the lira will quickly come under renewed pressure.”
President Tayyip Erdogan said on Friday that Turkey was freezing new government investment projects to cut public spending and tackle double-digit inflation.
Elsewhere in emerging Europe, Budapest shares fell 0.6 percent and the forint was trading off Friday’s three-week highs against the euro ahead of Tuesday’s central bank meeting.
The bank is expected to keep rates on hold at record lows, but may give clues on how it will withdraw liquidity from domestic markets.
Investors are also awaiting an address from Hungary’s prime minister Viktor Orban later today following last week’s vote by the European parliament to sanction Hungary for flouting European Union rules on democracy and civil rights.
Egyptian stocks fell 0.5 percent after slumping 3.6 percent on Sunday to mid-February lows in their biggest one-day loss since January 2017.
The moves followed the seizure of assets belonging to some Muslim Brotherhood leaders and an arrest order on former President Hosni Mubrak’s sons Alaa and Gamal on charges of stock market manipulation.
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Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1016.61 -11.92 -1.16 -12.24
Czech Rep 1095.23 -0.23 -0.02 +1.58
Poland 2225.38 -6.69 -0.30 -9.58
Hungary 36171.48 -97.69 -0.27 -8.14
Romania 8163.86 +1.17 +0.01 +5.29
Greece 682.67 +0.98 +0.14 -14.92
Russia 1088.79 -5.94 -0.54 -5.69
South Africa 49918.48 -522.50 -1.04 -4.98
Turkey 94875.40 +115.76 +0.12 -17.74
China 2651.79 -29.85 -1.11 -19.82
India 37629.97 -460.67 -1.21 +10.49
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.45 25.45 -0.00 +0.29
Poland 4.30 4.30 +0.07 -2.87
Hungary 324.81 324.70 -0.03 -4.40
Romania 4.64 4.64 -0.10 +0.76
Serbia 118.24 118.20 -0.03 +0.14
Russia 68.11 68.02 -0.13 -15.34
Kazakhstan 371.82 371.07 -0.20 -10.49
Ukraine 28.11 28.14 +0.11 +0.12
South Africa 14.98 14.92 -0.42 -17.52
Kenya 100.83 100.85 +0.02 +2.25
Israel 3.58 3.58 -0.12 -2.90
Turkey 6.22 6.17 -0.85 -39.10
China 6.87 6.87 -0.01 -5.27
India 72.47 71.87 -0.82 -11.92
Brazil 4.17 4.17 -0.00 -20.65
Mexico 18.86 18.88 +0.10 +4.16
Debt Index Strip Spd Chg %Rtn Index
Sov’gn Debt EMBIG 382 1 .00 7 70.15 1
Reporting by Claire Milhench; graphic by Marc Jones; Editing by Toby Chopra