Emerging-Market Currencies and Stocks Slide on Trade Jitters

  • Mozambique says won’t make coupon payment due Jan. 18
  • Lira resumes its slide, dragging index of currencies lower

Emerging-market assets declined as concern grew that threats to global trade and growth are proliferating. Mozambique’s international bond tumbled after the nation said it won’t make an interest payment on Jan. 18.

The MSCI Emerging Markets Index dropped the most in more than three weeks and a gauge of currencies slipped for the first time in three days. Investors turned bearish after a report that the U.K.’s exit from the European Union would also involving leaving the single market. U.S. President-Elect Donald Trump said other members would also quit the bloc. 

All but two of the 24 emerging-market currencies tracked by Bloomberg slid, led by Turkey’s lira, the world’s worst performer this year. Saudi Arabia’s Tadawul All Share Index was the biggest drag among major world gauges.

Mozambique’ Eurobonds fell after the nation’s ministry of economy and finance said it won’t pay an almost $60 million coupon due this week on a $726.5 million note maturing in 2023.

Currencies

  • MSCI Emerging-Market Currency Index retreated 0.3 percent as of 9:50 a.m. in New York.
  • The lira weakened 1.6 percent; South Africa’s rand lost 0.8 percent.
  • Latin American currencies declined, led by Mexico’s peso 0.8 percent slide. Brazil’s real lost 0.2 percent and the Colombian peso dropped 0.2 percent.
  • South Korea’s won dropped 0.6 percent. Prosecutors are seeking a warrant to arrest Samsung Group’s Jay Y. Lee for allegations including bribery and embezzlement.

Stocks

  • MSCI’s gauge of developing-nation stocks fell 0.7 percent.
  • Saudi Arabia’s Tadawul All Share Index retreated 1.6 percent.
  • Brazil’s Ibovespa rose 0.2 percent; miner Vale SA contributed the most to the gauge’s advance.
  • Egypt’s EGX 30 Index dropped 0.2 percent; an Egyptian court ruled on Monday that the nation has sovereignty over two Red Sea islands that the government had agreed to transfer to Saudi Arabia, one of its biggest financial backers.

Bonds

  • Mozambique 2023 Eurobond fell 2.9 cents to 55.11 cents on the dollar, with the yield rising 141 basis points to 25.5 percent.

Top Stories

  • Mozambique Default May Force Bondholders to Start Negotiations
  • Bonds Not Dead Yet for JPMorgan Fund Thriving in Short End
  • Emerging-Market Standout Backs Russia Into a Corner on Rates

Analysis

  • The won may strengthen toward 1,170 per dollar in the near term if foreign inflows return, although domestic political issues and economic uncertainty will cap gains, said Khoon Goh, the Singapore-based head of Asia research at Australia & New Zealand Banking Group Ltd.
  • Goldman Sachs Group is overweight local rates in Poland, where weak inflation will likely allow for monetary easing, and is underweight Turkish local rates due to “geopolitical uncertainty and challenging macro dynamics.”
  • A China Securities Journal article, written by the Chinese Academy of Social Sciences researcher Xiao Lisheng, said that China should allow the yuan to float freely and stop intervening in the foreign-exchange market.


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