LONDON, Sept 14 (Reuters) - Disappointing Chinese data weighed on emerging market assets on Thursday, capping stocks and dragging on some currencies, while Turkey’s lira touched a two-week low ahead of a central bank rate decision.
China posted its slowest growth in fixed-asset investment in nearly 18 years along with weaker-than-expected industrial output and retail sales, suggesting the world’s number two economy may be starting to lose steam as higher funding costs bite.
MSCI’s emerging market stocks index pulled back from the one-year high hit in the previous session to trade flat. Bourses across Asia painted a mixed picture with China mainland stocks and Hong Kong down 0.4 percent in the wake of China’s rare data miss.
Bourses in Russia, South Africa and Turkey all eased 0.4 percent. However, the losses were offset by heavyweight South Korea ending the day up 0.7 percent at a three week high after tech giant Samsung Electronics jumped 1.4 percent.
Some currencies also suffered as investors reflected on economic strength across emerging markets. Growth not being able to kick on further now posed a greater threat to assets than abating inflation trends, UBS wrote in a note to clients. “Much improved trade has been a big support for EM, but for growth momentum to pick-up one would need to see trade infect the credit cycle and investment, as it historically has,” said UBS strategist Bhanu Baweja.
“Thus far trends in EM capacity utilisation, industrial production, capital goods imports, and the credit impulse don’t inspire confidence that such acceleration is at hand.”
China’s yuan extended its losses against a weaker dollar on track for a fifth straight day in the red after the central bank lowered its official guidance to its weakest level in nearly two weeks.
Korea’s won and Mexico’s peso also edged lower, while Turkey’s lira touched its weakest level in two weeks ahead of a central bank decision due later in the day.
Policy makers in Ankara were expected to stay put as inflation rose more than expected in August, fuelled by rising transport and core prices.
Inflation remains one of Ankara’s most pressing economic problems, forcing policy makers to maintain a hawkish stance at odds with President Tayyip Erdogan, who supports lower rates.
However, oil prices holding onto their gains after forecasts for stronger oil demand provided support to Russia’s rouble, which gained 0.5 percent, snapping a two-day losing streak ahead of a central bank meeting on Friday.
Policy makers are expected to cut the key rate by 50 basis points to 8.5 percent after annual consumer inflation slipped below the central bank’s ultimate target of 4 percent.
Ukraine is also due to publish its interest rate decision, with policy makers expected to hold rates later on Thursday in the face of higher-than-expected inflation.
In other news, Saudi Arabia is preparing contingency plans for a possible delay to the planned initial public share offering of Saudi Aramco by a few months into 2019, according to a report by Bloomberg.
Saudi authorities are aiming to list up to 5 percent of the world’s largest oil producer on both the Saudi stock exchange in Riyadh, the Tadawul, and one or more international markets in an IPO that could raise $100 billion.
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Reporting by Karin Strohecker; Editing by Catherine Evans