LONDON, Sept 27 (Reuters) - Emerging market equities traded near three-week lows on Wednesday, pounded by the rising dollar and higher U.S. yields, while Turkey’s lira fell a mid-July low on fears of fallout from neighbouring Iraqi Kurdistan’s independence vote.
The dollar is close to one-month highs and 10-year Treasury yields have risen after U.S. Federal Reserve chair Janet Yellen reaffirmed the commitment to tightening policy. U.S. markets are also betting that U.S. President Donald Trump’s tax reform programme could finally gain some traction.
Emerging stocks are down around 3 percent since the Sept. 20 Fed meeting outcome, with MSCI’s index suffering a fifth day of losses.
Index losses were however limited by Hong Kong-listed Chinese shares, which rose half a percent after Beijing posted data showing robust profits at industrial firms.
Koon Chow, emerging markets strategist at asset manager UBP, said some expectations that there could be action on U.S. taxes was “triggering a reduction in speculative long euro positions and long emerging market currency positions against the dollar”.
Many emerging markets also face domestic headwinds, with the lira down half a percent to two-month lows and Turkey’s 2030 dollar bond slipping 0.4 cents, according to Tradeweb, just off a two-month low hit on Tuesday.
Many investors fear that Monday’s independence referendum in Iraq’s Kurdistan region raises the break-up risks for Iraq and will inflame separatism among Turkey’s Kurds. Ankara has threatened economic sanctions on the region, including choking off its oil exports.
Turkish stocks fell 0.6 percent but stayed off 2-1/2-month highs touched on Monday.
UBP’s Chow noted recent underperformance in Turkish assets due to the Kurdish issue but saw limited near-term impact on Turkey’s economy.
“Even if they do deliver on the threat to blockade oil exports from the Kurdish region that will have more of an impact on the Kurdish region and Iraq than on the Turkish economy. Turkey can always get their oil elsewhere,” he added.
South Africa’s rand fell 0.9 percent, hurt also by political wrangles between the treasury and the state pension fund over a possible bailout for the state airline. Bond yields rose 4.5 basis points, nearing a one-month high .
In emerging Europe, Russia’s weekly sale of 40 billion roubles of bonds will test appetite for one of this year’s best performing assets. Yields are at three-week highs, reacting also to troubles in the local banking sector.
The rouble was down half a percent to the dollar.
The Czech crown manwhile hit its strongest against the euro since the beginning of August, with some betting the central bank could hike interest rates.
Its strength contrasted with the Hungarian forint which weakened to four-month lows after the central bank resorted to more easing measures last week. Banks in particular have been hit by the moves, with shares in OTP Bank adding to the previous day’s 4.5 percent plunge.
Analysts at ING Bank however advised clients to sell the euro for forint, adding: “We don’t believe the current forint weakness will last for long as the effects of negative (central bank) and external factors should be now exhausted. We expect strong HUF fundamentals to reignite the euro/forint downtrend.”
On dollar bond markets, Saudi Arabia will complete its second dollar debt sale of the year, having announced initial pricing for a triple-tranche bond.
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 % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1078.01 -2.10 -0.19 +25.02
Czech Rep 1043.88 +1.38 +0.13 +13.27
Poland 2448.70 +5.36 +0.22 +25.71
Hungary 37587.04 +267.80 +0.72 +17.45
Romania 7981.96 +39.46 +0.50 +12.66
Greece 742.59 +2.22 +0.30 +15.37
Russia 1121.14 -6.12 -0.54 -2.71
South Africa 48960.77 +141.42 +0.29 +11.52
Turkey 03088.20 -841.13 -0.81 +31.93
China 3345.46 +1.88 +0.06 +7.79
India 31322.34 -277.42 -0.88 +17.64
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 26.05 26.03 -0.08 +3.68
Poland 4.30 4.29 -0.32 +2.42
Hungary 311.70 311.12 -0.19 -0.92
Romania 4.60 4.60 -0.02 -1.40
Serbia 119.36 119.41 +0.04 +3.34
Russia 58.17 57.85 -0.57 +5.31
Kazakhstan 340.00 339.73 -0.08 -1.87
Ukraine 26.46 26.35 -0.42 +2.04
South Africa 13.55 13.37 -1.31 +1.35
Kenya 103.20 103.20 +0.00 -0.80
Israel 3.54 3.53 -0.42 +8.75
Turkey 3.57 3.54 -0.92 -1.30
China 6.64 6.64 +0.02 +4.63
India 65.71 65.46 -0.39 +3.40
Brazil 3.17 3.17 -0.03 +2.72
Mexico 18.14 17.95 -1.05 +14.20
Debt Index Strip Spd Chg %Rtn Index
Sov‘gn Debt EMBIG 309 -4 .07 8 03.56 1
All data taken from Reuters at 09:03 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.
Reporting by Sujata Rao and Claire Milhench Editing by Jeremy Gaunt