EM equities buckle under China COVID worries, rouble bounces off 8-month low
Emerging market stocks slipped on Thursday, with Asian bourses under heavy selling pressure as optimism about China's reopening from COVID-19 restrictions gave way to fears about the spread of the...

- KOSPI records 25% loss for 2022 * COVID spike in China dampens global mood * Dollar weakness helps EM FX Dec 29 (Reuters) - Emerging market stocks slipped on
Thursday, with Asian bourses under heavy selling pressure as
optimism about China's reopening from COVID-19 restrictions gave
way to fears about the spread of the virus globally. The MSCI's EM equities index slipped 0.4%, set to
wipe out two days of relative optimism over China's dismantling
of its zero-COVID policy. Stock markets in Shanghai , Hong Kong
, Taipei and Seoul fell in the range of
0.4% and 1.9%. In its final trading day of the year, South
Korea's benchmark KOSPI recorded a 25% loss in 2022, its worst
yearly performance since 2008. "The bad news with China's reopening is that it will not
only boost global growth, but also energy and commodity prices -
hence inflation, the interest rate hikes from central banks and
potentially the global COVID cases," said Ipek Ozkardeskaya,
senior analyst at Swissquote Bank. The re-opening raises the prospect of Chinese tourists
returning to shopping streets around the world but the United
States, India, Italy, Japan and Taiwan said they would require
COVID tests for travellers from China. Adding to the glum mood, Russia fired more than 100 missiles
into Ukraine on Thursday, targeting the capital Kyiv where three
people were wounded, the northeastern city of Kharkiv, and other
cities in a large-scale bombardment, Ukrainian authorities said. The Russian rouble recovered slightly after
hitting an eight-month low against the dollar earlier on
concerns that Western sanctions on Russian oil and gas may limit
export revenues. The rouble strengthened by 0.6% to 71.74 per dollar, having
earlier touched 72.92, its weakest since April 27. Overall, EM currencies found breathing space as the dollar
slipped. The South African rand, the Hungarian forint
and the Polish zloty rose in a range of 0.1% and
0.6%. Emerging market economies have witnessed sharp capital
outflows this year, spurred by a toxic mix of aggressive
interest rate increases, a strong dollar and soaring inflation
caused by Russia's invasion of Ukraine as well as disruption
caused by the pandemic. The EM equities index is set to clock annual declines of
over 22%, its worst performance since the financial crisis in
2008, with stocks in eastern Europe at the sharp
end of the selloff. Its currencies counterpart, with a 4.4%
decline, is set for its worst year since 2015 when a crash in
commodity prices and slowing economic growth knocked many
emerging assets. Meanwhile, returns on emerging market sovereign debt spreads
, the premium that investors demand for holding riskier
security than U.S. Treasuries, is down 17.6% this year,
according to JPMorgan.
For GRAPHIC on emerging market FX performance in 2022, see URL
For GRAPHIC on MSCI emerging index performance in 2022, see URL For TOP NEWS across emerging markets For CENTRAL EUROPE market report, see For TURKISH market report, see For RUSSIAN market report, see
(Reporting by Sruthi Shankar in Bengaluru; Editing by Robert
Birsel)