EM stocks watch fourth straight weekly decline
Moody’s will review Hungary’s rating on Friday
Sri Lanka will present a debt restructuring plan to creditors
Egypt c.bank keeps interest rates on surprise move
By Amruta Khandekar and Anisha Sircar
September 23 (Reuters) – Most emerging-market currencies were dampened against a resilient dollar on Friday as investors digested hawkish signals from the US Federal Reserve, while stocks hit more than two-year lows on jitters of a global economic slowdown.
The MSCI index of EM (emerging market) stocks fell 1% and headed for its fourth straight weekly decline in a week dominated by central bank policy action, including an outrageous 75 basis point rate hike by the Fed.
The index is down 26% so far this year as aggressive monetary tightening, geopolitical tensions and growing fears of a recession push investors towards safer assets like the US dollar.
EM stocks saw outflows of $2.5 billion this week compared to $1.7 billion last week, while bond outflows were $2.6 billion from last week’s $1.5 billion reached, weekly data from JPMorgan citing EPFR Global showed.
“Everything is negative for emerging markets today… In Europe, the question of a recession is on the table and the geopolitical situation is not improving – everything points to negative sentiment,” said ING strategist Frantisek Taborsky.
Among EM currencies, the South African rand fell 0.9%, erasing gains from the previous session as the country’s central bank hiked interest rates by 75 basis points as expected.
The Turkish lira also fell 0.4%, a day after its central bank announced a surprise 100 basis point rate cut.
Most Central and Eastern European currencies were weak against the euro, with the Romanian leu and Hungarian forint each losing around 0.2%. Moody’s is expected to issue a ratings report on Hungary later in the session, with analysts expecting a downgrade.
“It is a question of whether or not Hungary will have access to EU (European Union) funds. Hungary will find some kind of agreement, but it will take time,” Taborsky added.
The Indian rupee rose 0.2% against the dollar. The Reserve Bank of India is set to hike rates again next week, with a slim majority of economists expecting a half-point hike in a Reuters poll.
Meanwhile, Egypt’s central bank left overnight interest rates unchanged on Thursday, bucking analysts’ expectations for a 100 basis point hike.
Sri Lankan authorities will hold talks with international creditors on Friday to begin the process of restructuring billions of dollars in debt. For a 2022 Emerging Markets FX performance CHART, go to http://tmsnrt.rs/2egbfVh. For a 2022 MSCI Emerging Index performance CHART, go to https://tmsnrt.rs/2OusNdX
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