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The emerging-market rout continues, China looks to calm jittery investors, and a Bank Indonesia rate hike looms. Here are some of the things people in markets are talking about.
Another Ugly Day for Emerging Markets
Emerging-market assets had another rough day on Thursday. Stocks, bonds and currencies in developing nations are closing out their worst quarter since 2015 and facing a looming global trade war, tightening U.S. monetary policy and a weaker worldwide growth outlook. The consensus is that, whether emerging markets are set for a rebound or a deeper sell-off, in the short term the asset class is at the mercy of trade headlines. Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. have warned in recent days that more pain lies ahead thanks to U.S.-China trade tensions. The MSCI emerging-markets index slumped as much as 1.3 percent Thursday, bringing its second-quarter decline to more than 10 percent. At least developed-market equities bounced back. Asian stocks looked set to advance on Friday morning.
PBOC on Standby
China’s central bank said it’ll use comprehensive policy tools to keep economic development steady and stabilize market expectations. The PBOC will keep a close eye on domestic and global economic developments and step up forward-looking policy fine-tuning, according to a statement released Thursday after a meeting of the advisory monetary-policy committee led by Governor Yi Gang Wednesday. The PBOC is about to lower the reserve ratios for some banks next Thursday -- the third cut this year -- as it strives to keep a balance between debt containment and stable growth. Meanwhile, most traders say China is likely to step in and defend the yuan should it fall to the key psychological level of 6.7 per dollar, according to a Bloomberg survey. The offshore yuan fell for an 11th day, the longest-ever losing streak.
A-Shares Have Rough Entry Into MSCI
Global passive funds are buying China’s domestically traded shares for the first time, and it’s not going so well. Stocks in Shanghai have tumbled 13 percent in dollar terms since MSCI Inc. added A-shares to its indexes at the start of the month. Worries about a slowing economy, tightening liquidity and possible trade war are plaguing the world’s second-largest stock market, while a suddenly tumbling currency is only adding to foreign investor losses. While MSCI’s decision to initially allocate a minuscule weighting to so-called A-shares will limit the fallout, the almost $2 trillion rout is evoking uncomfortable echoes of Chinese market panic just three years ago. A repeat of such turmoil, even on a lesser scale, is likely to undermine efforts in Beijing to encourage foreign inflows and stabilize a market still dominated by speculators.
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