LONDON, Oct 13 (Reuters) - The Turkish lira slid to a record low, the South African rand lost over one percent and emerging equities tumbled to three-week depths on Thursday after weak Chinese data and Fed minutes that signalled a rate hike.
The Turkish lira lost 0.65 percent against the dollar after the government signalled it would revive plans to push through an executive presidential system.
“The return of the risk that (President Tayyip) Erdogan is actually very much focused on his agenda of pursuing the executive presidency ... is a negative,” said Roxana Hulea, an emerging markets strategist at Société Générale. She added that this compounded concerns about democratic values in Turkey.
The yield premium paid by Turkish sovereign dollar bonds over U.S. Treasuries also rose by 7 basis points on the day (bps) to 319 bps, the highest in 10 days.
South Africa’s volatile rand slipped again too, losing over 1 percent against the dollar. South Africa’s state prosecutor said Finance Minister Pravin Gordhan could ask for a review of a decision to charge him with fraud.
“That hasn’t really reassured the market and it shows again that the political side of things remains extremely uncertain and volatile, hence the market is approaching (South Africa) in a very cautious manner,” said HSBC FX strategist Murat Toprak.
The uncertainty around the fate of Gordhan, who is popular with investors, has sparked a sell-off in South African assets this week, and the 10-year local government bond is trading at around six-week lows.
South African five-year credit default swaps rose 2 basis points (bps) on the day to 268 bps, according to Markit data, the highest level since July 8. South African dollar bond yields also stayed near three-month highs.
Toprak said the market remained concerned about the possible removal of Gordhan, which could hurt the country’s credibility ahead of a ratings review by Moody‘s, which recently downgraded Turkey, in November. “There is a possibility the country could be downgraded to below investment grade, which is obviously putting pressure on the market,” he said.
MSCI’s benchmark emerging markets index fell 1.2 percent to its lowest level since mid-September, after data showed China’s September exports fell 10 percent year-on-year, far more than expected, while imports shrank 1.9 percent.
The weak data soured sentiment and fuelled a broader risk-off move, cemented by minutes from the U.S. Federal Reserve that showed several voting policymakers judged a rate hike was warranted “relatively soon” if the U.S. economy continued to strengthen.
“Chinese trade data is a big factor - it suggests domestic demand isn’t as strong ... which has a knock-on effect on other emerging markets,” said William Jackson, senior emerging markets economist at Capital Economics.
Chinese mainland stocks traded flat, but Hong Kong shares sold off 1.6 percent to six-week lows, and Korea stocks lost almost one percent to trade at three-week lows, despite a rebound in Samsung shares of 1.4 percent.
After keeping its base rate unchanged at 1.25 percent, the Bank of Korea warned that Samsung’s smartphone crisis could hamper economic growth. The won weakened 1.1 percent against the dollar to three-month lows.
China’s data woes sent the yuan to a new six-year low, reinforcing the view that the world’s second largest economy may pursue a weaker currency policy in coming months.
Oil producers’ currencies also came under pressure following a move lower in the oil price after a report from OPEC pointing to a larger 2017 surplus despite the group’s deal to cut output.
The Russian rouble weakened 0.3 percent against the dollar and the Malaysian ringgit lost 0.6 percent to trade at eight-month lows.
Polish assets led falls in Eastern Europe, with stocks down almost one percent while the zloty weakened 0.4 percent against the euro.
For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
Emerging Markets Prices from Reuters Equities Latest Net Chg % %
Morgan Stanley Emrg Mkt Indx 892.77 -9.97 -1.10 +12.42
Czech Rep 889.71 -1.03 -0.12 -6.97
Poland 1744.39 -16.04 -0.91 -6.17
Hungary 28303.15 -93.72 -0.33 +18.32
Romania 6900.93 -18.46 -0.27 -1.48
Greece 579.61 -6.63 -1.13 -8.20
Russia 987.58 -8.38 -0.84 +30.45
South Africa 44559.07 -489.50 -1.09 -2.70
Turkey 76788.56 -672.70 -0.87 +7.06
China 3061.35 +2.85 +0.09 -13.50
India 27593.52 -488.82 -1.74 +5.65
Currencies Latest Prev Local
% change %
Czech Rep 27.02 27.01 -0.04 -0.07
Poland 4.31 4.29 -0.42 -1.16
Hungary 306.30 305.26 -0.34 +2.72
Romania 4.50 4.50 -0.10 +0.41
Serbia 123.01 123.04 +0.02 -1.25
Russia 63.27 63.09 -0.28 +15.30
Kazakhstan 330.80 330.65 -0.05 +2.93
Ukraine 25.79 25.79 +0.00 -7.13
South Africa 14.34 14.21 -0.88 +7.82
Kenya 101.20 101.20 +0.00 +0.99
Israel 3.81 3.81 +0.01 +1.93
Turkey 3.10 3.08 -0.51 -5.91
China 6.73 6.72 -0.16 -3.51
India 66.90 66.80 -0.15 -1.05
Brazil 3.20 3.20 +0.05 +23.75
Mexico 18.98 18.90 -0.42 -9.54
Debt Index Strip Spd Chg %Rtn Index
Sov‘gn Debt EMBIG 360 5 .00 7 65.96 1
Additional reporting by Adela Suliman