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Emerging market equities and currencies down

26 February 2021
1 min.
Emerging market equities and currencies down

Record inflows of $11.6bn emerging markets

Emerging market equities lost almost 3% on Friday following a jump in US government bond yields and could show their biggest weekly decline since March 2020. The South African rand gained 1% thanks to a rally amid hopes of an economic recovery.

Asian shares fell sharply, with stock indices in Taiwan and India falling more than 3%. South Korean and Chinese stocks also fell in value.

Turkish stocks hit a one-month low, while South Africa's main index was down 2%.

The MSCI Emerging Market Equity Index sank to a four-week low and could post its steepest one-day decline in more than nine months and a weekly decline of almost 6%.

US 10-year treasury bond yields fell slightly on Friday, but continued to hold near their yearly peak.

However, Barclays (LON:BARC) interprets rising US government debt yields and real yields as favourable for emerging market assets, as they seem to reflect optimism about growth and the effects of wider US fiscal stimulus.

Rising intermarket volatility could affect inflows into emerging market fixed income funds, but, "on balance, we believe any correction is likely to trigger buying rather than escalate into a prolonged and deep sell-off of emerging market assets at this stage", Barclays analysts said.

Emerging markets saw record inflows of $11.6 billion in equities and bonds in the week ended February 24, BofA said.

The MSCI Emerging Markets Currency Index fell 0.4% and may show its worst session in almost a year due to Asian currencies falling against the dollar.

The South African rand rose 1.2 percent after falling about 4 percent on Thursday.

The Turkish lira stabilised after falling 2 per cent in early trading.

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