Emerging market (EM) shares yesterday hit a one-month low, taking their cue from Wall Street, which plunged after the US Federal Reserve raised rates and signaled more hikes next year, dashing investors’ hopes for a more dovish outlook.
The Fed raised key rates by 25 basis points and trimmed its median forecast from three to two hikes next year, but said that strong data could force it to raise rates to the point where they start to brake the US economy’s momentum.
The US dollar strengthened after the announcement, but later retreated 0.4 percent, lending strength to most developing world currencies.
MSCI Inc’s index for emerging market stocks fell about 1 percent as indices across Asia fell, with South Korea’s KOSPI heading into bear market territory and bourses from Johannesburg to Istanbul racking up hefty losses.
“The markets had priced in a bit too dovish Fed, but the EM reaction was more or less expected,” Danske Bank A/S head of EM research Jakob Christensen said.
China shares ended at two-month lows after the central bank announced a new targeted lending tool.
“The weakness in China will continue to weigh on EM until Q1 of 2019, with the US-China standoff getting better and lending support to China’s current vacuum,” Christensen said.
Russia’s MOEX index hovered around three-week lows, led by a decline in shares of energy companies as oil prices erased most of their gains from the previous session.
However, aluminum giant United Co Rusal soared 22 percent, after news that the US Treasury would lift sanctions on the core empire of Russian businessman Oleg Deripaska.
Currencies in the developing world were mostly steady with the exception of the Chinese yuan and the Indonesian rupiah, which fell after its central bank kept benchmark interest rates on hold, but pledged to defend the currency if needed.
In eastern Europe, the Czech crown was treading water against the euro ahead of its central bank’s meeting where policymakers were expected to keep the two-week repo rate at 1.75 percent.
The Hungarian forint was mildly stronger, unscathed by a sharp decline in the third-quarter current account surplus, and a Moody’s report that said the nation’s policy responses would be tested by more challenging external conditions in the coming years.
China’s economic planning agency yesterday outlined details of measures aimed at boosting the economy, but refrained from major spending initiatives. The piecemeal nature of the plans announced yesterday appeared to disappoint investors who were hoping for bolder moves, and the Shanghai Composite Index gave up a 10 percent initial gain as markets reopened after a weeklong holiday to end 4.59 percent higher, while Hong Kong’s Hang Seng Index dived 9.41 percent. Chinese National Development and Reform Commission Chairman Zheng Shanjie (鄭珊潔) said the government would frontload 100 billion yuan (US$14.2 billion) in spending from the government’s budget for next year in addition
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TECH JUGGERNAUT: TSMC shares have more than doubled since ChatGPT’s launch in late 2022, as demand for cutting-edge artificial intelligence chips remains high Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday posted a better-than-expected 39 percent rise in quarterly revenue, assuaging concerns that artificial intelligence (AI) hardware spending is beginning to taper off. The main chipmaker for Nvidia Corp and Apple Inc reported third-quarter sales of NT$759.69 billion (US$23.6 billion), compared with the average analyst projection of NT$748 billion. For last month alone, TSMC reported revenue jumped 39.6 percent year-on-year to NT$251.87 billion. Taiwan’s largest company is to disclose its full third-quarter earnings on Thursday next week and update its outlook. Hsinchu-based TSMC produces the cutting-edge chips needed to train AI. The company now makes more
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