Investors and policymakers in emerging economies are engaged in a high-stakes tug of war, with periodic selloffs being met by one-off support measures from authorities attempting to stem losses.
(Bloomberg) — Investors and policymakers in emerging economies are engaged in a high-stakes tug of war, with periodic selloffs being met by one-off support measures from authorities attempting to stem losses.
China’s yuan extended declines into a fourth day and erased all of its post-reopening gains even after authorities cut a key interest rate and began considering a stamp-duty reduction for stock trades. The interventions came as data releases offer further evidence of a stalling economic recovery, leaving investors looking for larger and more sustained stimulus.
Read more: China Rate Cut Reaction the Latest Sign Beijing Has More to Do
Russia saw a similarly muted response to a drastic policy adjustment. After rallying as much as 5% before the central bank hiked interest rates by 350 basis points at an emergency meeting on Tuesday, the ruble erased gains to trade weaker on the day. The currency had broken below the 100-per-dollar mark on Monday, as the country struggles with the economic fallout from its war on Ukraine and Western sanctions.
Read more: Russia Hikes Rates at Emergency Meeting After Ruble’s Crash
After two years of monetary tightening, governments and central banks are finding their capacity to support markets limited by inflation and currency risks. That’s helping to propel emerging-market stocks to a sixth year of underperformance relative to their US peers. The local-currency index is inching close to erasing its 2023 gains.
On Tuesday, the stocks benchmark slid for a fourth day and the currency gauge for a third. The cost of hedging against default rose to a one-month high on an index of 20 major emerging markets.
Read more: Naira Loses Key Support After Nigeria FX Reserve Revelations
In Nigeria, an inflation release on Tuesday showed price gains hovering around an 18-year high, raising doubts about how far President Bola Tinubu will be able to push his economic transformation program. In Colombia, data may show a quarter-on-quarter contraction in gross domestic product, which could put pressure on the central bank to begin interest-rate cuts.
As US traders started their day, a name familiar to emerging-market investors was making news again. Hindenburg Research, which previously published bearish wagers on India’s Adani Group, said it has now taken short positions in Kazakh billionaire Timur Turlov’s Freedom Holding Corp. The company’s US-listed stock fell 6.8% in New York premarket trades.
In Uganda, policymakers cut rates and the nation’s currency resumed its slide. Authorities pledged intervention if necessary as the shilling continued to drop days after the World Bank halted new funding to the country, citing anti-LGBTQ legisllation.
Meanwhile, the turmoil in Argentina continued. The country is set to report its latest inflation figures, and a projected drop from 115.6% to 115% is unlikely to change much. The nation’s political future is increasingly uncertain after Sunday’s primary vote, where gains made by a populist leader have renewed fears of hyperinflation.
Read more: Argentine Shops Hit With 20% Overnight Price Hike After Election
(Adds news on Hindenburg, Uganda)
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