London - Emerging stocks registered their
biggest daily fall in nearly a month on Monday and currencies
broadly weakened with Turkey's lira falling again as investors
showed nerves ahead of President-elect Donald Trump's
inauguration.
MSCI's emerging stock index fell 0.7 percent with
some heavyweight exchanges in Asia such as Hong Kong,
Taiwan down around 1 percent while bourses in Russia
and Poland slipped 0.5 percent.
Currencies fared little better. Turkey's lira led the
falls against the dollar, weakening by 1.3 percent and extending
losses since the start of the year to 6.3 percent.
The currency weakened despite the central bank effectively
closing off two of its lira funding taps and forcing banks to
use its "late liquidity window" in an effort to stem the falls
while the government said it expected the central bank to act
and volatility to fade.
"These tools potentially make what is already a convoluted
monetary policy set up more complicated," said William Jackson,
senior emerging market economist at Capital Economics, adding
that the difficulty in gauging monetary policy stance had been a
frequent concern for investors.
"There are fundamental reasons why the Turkish lira should
weaken with US policy set to tighten and domestic political
concerns...Also, it's an economy with an entrenched high wage
growth, high inflation problem," he said, adding he expected the
central bank to hike interest rates at a meeting on January 24.
Turkish assets have been roiled by worries over its big
external financing needs, political reforms, a lacklustre
economy and security threats.
South Africa's rand nearly matched the losses,
weakening by more than 1 percent and chalking up the biggest
daily fall in 10 days. Mexico's peso slipped 0.7 percent.
Across emerging Europe, currencies weakened against the
euro. Serbia's dinar slipped 0.2 percent despite the
central bank intervening once again to prop up the
dinar.
And in eurobond issuance, Argentina started its investor
roadshow, aiming to sell $3-5 billion just nine months after it
sold $16.5 billion in its return to capital markets. Egypt is
also meeting investors in what could be a bumper week for
issuance from emerging market countries.
Meanwhile Mozambique said it would not pay the coupon due on
January 18 for its 2023 eurobond citing its
deteriorating economic and fiscal situation as the country is
edging closer to default.