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Emerging markets stocks faltered yesterday, on fears of a global spread of the coronavirus after a spike in new cases in South Korea, while currencies in the developing world reeled under pressure from safe-haven buying of the US dollar.
Investors dumped emerging market assets as research suggested that the pathogen is more contagious than initially thought.
It has now infected some 75 000 people and killed about 2 100.
“There are more concerns about it (coronavirus) spreading in South Korea and Japan, while fears about supply chains continue to build,” said William Jackson, chief emerging markets economist at Capital Economics in London.
The risk-off mood supported the dollar, which surged nearly two percent since Tuesday against the Japanese yen to its highest in almost 10 months.
Most emerging market currencies were pushed lower by the rising greenback, with the high-yielding South African rand falling one percent to levels not seen since November.
“The rand gets quite badly affected in these periods of risk-off, it is also one that is particularly exposed to commodity prices so its a double whammy here,” Jackson said.
South Africa’s currency has also taken a hit from growing pessimism around the country’s economy, while local investors remained on edge ahead of a looming ratings decision by Moody’s.
MSCI’s index for currencies slipped 0,4 percent to its lowest level in over two months, while stocks fell 0,3 percent.
A cut in China’s benchmark lending rate yesterday helped Chinese stocks find footing but did little to calm anxiety around the fast-spreading virus.
Turkey’s lira eased against the dollar, holding near its lowest point in trading since last May. — Reuters.
Online Reporter