SHANGHAI, Jan 5 — Emerging market stocks broke a four-day winning streak today as regulatory fines hit heavyweights Tencent and Alibaba, dragging tech stocks, while worries about inflation and tighter US monetary policy also weighed.
China’s tech sector slipped 2.8 per cent, dragging the broader blue-chip index down 1.0 per cent. Hong Kong’s main index closed down 1.6 per cent in its worst session in more than two weeks.
Alibaba, Tencent and Bilibili dropped between 2.1 per cent and 10.6 per cent after the country’s top market regulator fined them for failing to properly report about a dozen deals — the latest act in Beijing’s crackdown on several industries that began last year.
With e-commerce firm Meituan also sinking 11.2 per cent, MSCI’s China-heavy index of emerging stocks fell 0.9 per cent, further away from three-week highs.
Stocks in Russia, South Africa and Poland all fell between 0.1 per cent and 0.3 per cent, tracking weak Asian sentiment.
In Kazakhstan, violent protests over fuel price hikes saw its government resign — serving as a warning to other emerging markets policy makers trying to square the circle between tackling high inflation and resulting burdens on the population. .
Kazakhstan’s dollar-denominated sovereign bonds suffered sharp falls with the 2045 issue dropping around 3 cents to the dollar and many back to levels last seen in 2020, Tradeweb data showed.
Turkey is now prioritising a “sincere” fight against high inflation, Finance Minister Nureddin Nebati said on Wednesday. Inflation there rose to 36 per cent in December after a series of interest rate cuts sought by President Tayyip Erdogan.
Turkey’s lira was last up 0.1 per cent at 13.4 per dollar after having fallen up to 1.6 per cent earlier in the session.
“We think that (Turkey’s) headline inflation will likely move towards 45 per cent in the next couple of months and might increase further towards 48 per cent or so in 2Q,” said Credit Suisse analyst Berna Bayazitoglu.
But the ongoing lira volatility leaves the margin of error wide, Bayazitoglu said, adding that recently announced increases in electricity and natural gas prices and minimum wage add to the inflationary pressures.
Most other emerging markets currencies made guarded moves against the dollar as investors priced in policy tightening in the United States, slating in the first of three rate hikes signalled, for May.
This sent US Treasury yields and the dollar higher overnight. Today, the dollar index held steady.
China’s yuan and South Africa’s rand were flat, while Russia’s rouble hit its lowest in more than five weeks.
Embattled China Evergrande Group lost another 0.6 per cent after it sought delay to onshore bond payment due on Saturday, which would be its first domestic bond payment miss. A bondholder meeting is scheduled for January 7-10.
Bad loan company China Huarong plunged 50 per cent to a record low, on resuming trade following a nine-month hiatus. — Reuters