EMERGING MARKETS-China pangs push stocks down for a third straight session

by Reuters
Wednesday, 15 September 2021 08:27 GMT

* China's factories, retailers stumble

* Fitch warns of China economic effects if Evergrande defaults

* S.African rand falls, JPM recommends selling

* Turkey raises required reserves ratios for forex liabilities

By Susan Mathew

Sept 15 (Reuters) - Weak China data and Evergrande's woes cast a pall over emerging market sentiment on Wednesday, with an index of stocks extending losses to a third straight session.

China's factory and retail sectors faltered in August with output and sales growth hitting one-year lows, hurt by fresh coronavirus outbreaks and supply disruptions.

China blue-chips fell 1%, while Hong Kong shares hit a near four-week low, sliding 2%.

But given many locations are relaxing social distancing measures, China's retail sales should bounce back, said Credit Suisse analysts. Although headwinds for the property sector intensified.

Rating agency Fitch on Wednesday said that numerous sectors could be exposed to heightened credit risk if China's No.2 property developer Evergrande Group were to default. Its shares fell another 5.4%, bringing losses so far this year to 81%.

MSCI's index of EM shares hit a three-week low, down 0.5%, but gains elsewhere, which sent Indian and Russian benchmark indexes to fresh record highs, capped falls.

Currencies mostly firmed against a dollar steadying after a slide on tamer-than-expected U.S. inflation on Tuesday. The data raised questions about the Federal Reserve's decision about stimulus tapering at a meeting next week.

South Africa's rand erased early losses to trade 0.2% higher. The currency dropped more than 1% on Tuesday after JPMorgan recommended selling it to cash in on a recent hot-streak that has made it one of the world's best performing currencies this year.

The rand is up 2.8% so far this year, having recovered to pre-pandemic levels.

The Turkish lira traded flat-to-higher. The central bank raised the required reserves ratio for foreign currency and precious metal deposits by 200 basis points, an official notice said.

A Reuters poll shows the bank is seen holding the key lending rate unchanged at 19% next week, even amid central bank Governor Sahip Kavcioglu's dovish stance and calls for cuts by the country's president.

The Russian rouble's 0.5% gains was among the biggest in EM currencies on the day. But the currency is yet to fully recover from the pandemic slide, having been trading in ranges this year.

Increasing tensions with the West that resulted in sanctions weighed on the currency, although a prudent central bank and a strong balance sheet have helped it weather the blows, leaving it up almost 2% for the year - above a 1% rise for the broader EM FX index.

For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX

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For CENTRAL EUROPE market report, see

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For RUSSIAN market report, see

(Reporting by Susan Mathew in Bengaluru; Editing by Alex Richardson)

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