Deteriorating sentiment as China’s economy slows and the US raises interest rates hurt stocks and bonds, with an index of equities covering developing countries posting the biggest annual drop since 2011. The premium investors demand to hold emerging-market sovereign debt widened for an unprecedented third year after the US Federal Reserve took the long-awaited move of tightening monetary policy and signaled more to come.
UBS AG and Citigroup Inc strategists said last month that more pain is coming because developing markets have not fallen enough to reflect subdued global growth.
A slump in commodities that pushed down the price of Brent crude is also damping confidence as economists forecast China, the world’s second-biggest economy and a major buyer of raw materials, will slow further this year.
China’s GDP is forecast to increase 6.5 percent this year, slowing from an estimated 6.9 percent last year, already its weakest pace in 25 years, according to a Bloomberg survey of economists.
The MSCI Emerging Markets Index retreated 17 percent last year. Chinese shares traded in Hong Kong and equities in Brazil, Colombia, Turkey and Egypt were among the biggest decliners last year. The measure is valued at 11 times projected 12-month earnings. The MSCI World Index fell 2.7 percent last year and is valued at a multiple of 15.7.
All 10 industry gauges in the developing-nation index fell last year, led by declines of 20 percent or more in energy, financial, telecommunications, utility and raw-material companies.
The TAIEX rose 0.7 percent on Thursday.
The Hang Seng China Enterprises Index was little changed, after falling 1.3 percent on Wednesday, paring last year’s decline to 19 percent.
Markets in South Korea, Philippines, Indonesia and Thailand were closed for holidays.
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