Emerging market stocks and currencies hovered just above their lowest level in almost two years on Monday as dire Chinese economic data renewed concerns around global growth, while the South African rand came under pressure from domestic power cuts.
The MSCI index for emerging market (EM) equities inched 0.2% higher, still down 6.5% on the month and nearly 20% on the year, while currencies were little changed against a strong greenback after a sixth straight weekly decline last week.
The dollar index was perched at a two-decade peak as investors ramped up US monetary policy tightening expectations.
“The main factor weighing on risky emerging assets is the prospect of further rate hikes by the Fed, accompanied by growing concerns that the global economy could be heading for recession,” said Piotr Matys, senior FX analyst at In Touch Capital Markets.
Concerns around monetary tightening amid slowing global growth, rising inflation and a cooling commodity price rally have hampered the attractiveness of emerging markets.
China stocks fell between 0.3% and 0.8% as data showed the country’s April retail sales shrank 11.1% on the year, almost twice the drop forecast, while industrial output fell 2.9%.
South Africa’s rand fell 0.4% as domestic power cuts, weaker gold prices and a blurry growth outlook weighed on the currency.
Investor focus was on a monetary policy decision expected on Thursday where the central bank is likely to make its first 50 basis point repo rate hike in more than six years.
The Czech crown inched 0.3% higher after hitting two-month lows last week. Data showed industrial producer prices rose 26.6% year-on-year in April, greater than market expectations.
The Czech National Bank launched a “true monetary-policy intervention” when it entered the market on May 12 to stop a weakening of the crown, board member Tomas Holub said Friday.
The Sri Lankan rupee fell 1.2% ahead of an address by the crisis-hit country’s new prime minister, Ranil Wickremesinghe.
Turkey’s lira fell 0.5% as the central bank said the country’s current account deficit in March widened to $5.554 billion, more than the forecasted $5.371 billion, but is up about 18% from its record low hit in December.
“The government notion that Turkey will be able to bring inflation lower in coming quarters if the current account deficit narrows is being put to a major test,” Matys said.