* South African rand hits lowest level in two weeks
* Average yield of emerging bonds in local currency at April 2020 high
* Polish zloty slips on central bankers’ views on rates
September 16 (Reuters) – Emerging market stocks fell 0.8% on Thursday, putting them on track for their worst week in a month amid investor fears of contagion from a potential fall from the promoter Chinese real estate Evergrande.
The actions of the Chinese no. Property developer 2 lost 6.4%, bringing its losses so far this week to nearly 30%, after asking to suspend trading of its onshore corporate bonds following further downgrade.
Hong Kong stocks fell to their lowest level this year, and mainland stocks fell more than 1% as other real estate stocks also sold.
The MSCI Emerging Equity Index has fallen every day this week due to growing business regulation in China, weak economic data and the woes of Evergrande.
Since the impact on the Chinese credit market has focused on the real estate sector and only on names that have struggled to raise funds, the impact on other sectors as well as emerging markets more large should be limited, said Eugenia Fabon Victorino, Asia Strategy Manager at SEB in Singapore.
“But that would really depend on how it is resolved. Historically, defaults in China have been fairly quick, although there has been a process in which domestic stakeholders have limited impact, ”she said.
“Limiting this will also limit the risk of it becoming a systemic risk… The big banks in China are comfortably above regulatory capital ratios and should be able to take the blow.
Elsewhere, the Russian ruble edged down after hitting 11-week highs on Wednesday. Russian President Vladimir Putin has said he is expected to spend “a few days” in isolation after dozens of people around him fell ill with COVID-19, TASS news agency reported.
The Turkish lira was flat. Turkey’s central bank said it has formed a platform to expand research on the potential benefits of a digital currency, the results of which will be announced in 2022.
The South African rand fell to its lowest level in two weeks, prolonging declines after lower retail sales in July, proving the economy got off to a shaky start in the third quarter.
The Polish zloty hit a two-week low as investors digested statements about the direction of interest rates in the country. One central banker saw a likely hike while another said a hike was not needed at this point. Earlier this month, the central bank left its policy rate unchanged at 0.1%.
In the debt market, the average yield on emerging local currency bonds is now nearly 5.1%, the highest since April 2020.
For the CHART on the performance of emerging market currencies in 2021, see tmsnrt.rs/2egbfVh For the CHART on the performance of the MSCI emerging index in 2021, see tmsnrt.rs/2OusNdX
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Reporting by Susan Mathew in Bangalore; Editing by Emelia Sithole-Matarise