EM equities buckle under China COVID worries, rouble bounces off 8-month low

• 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)