KUALA LUMPUR: The ringgit led a decline in emerging-market currencies as stocks retreated after a selloff in oil stoked concerns about global growth.
It slumped the most in two weeks and South Korea’s won fell for a second day as a gauge of developing-nation shares tracked losses in global equities.
China’s CNOOC Ltd was among the biggest decliners a day after Brent crude weakened for a fifth session to close below US$42 a barrel for the first time since April.
Philippine stocks dropped the most in almost two months.
Emerging-market assets have retreated from their highest levels in a year as investors turned their focus onto the global economy after speculation that central banks will boost stimulus and the US will keep interest rates low amid lacklustre growth sent valuations to the highest level since May 2015.
Japan’s plan for extra government spending failed to ignite optimism that Prime Minister Shinzo Abe can revive the world’s third-biggest economy.
“Lower oil prices seems to be impacting the risk sentiment negatively,” said Divya Devesh, a Singapore-based foreign-exchange strategist at Standard Chartered Plc.
“If oil continues to decline it will be negative for emerging-market assets. Other than that, we might be seeing some consolidation in currencies after a strong rally in recent weeks.”
A rally that sent the MSCI Emerging Markets Currency Index to its highest level since July 2015 on Monday appears to be losing steam, with the measure retreating 0.1% in a second day of declines on Wednesday.
The ringgit depreciated 0.7%, the most since July 18. Lower oil prices are weighing on the outlook for Malaysia’s exports.
A government report due Friday will probably show shipments fell 3.7% in June from a year earlier, the biggest drop since May 2015, according to the median forecast of economists in a Bloomberg survey.
South Africa’s rand and Turkey’s lira weakened 0.2 percent each. The won was down 0.1% while Indonesia’s rupiah fell 0.1%.
Even so, developing-nation exchange rates have been resilient in the face of the recent drop in crude, buoyed by optimism that global central banks will keep monetary policy accommodative to support growth.
The yearly correlation with Brent crude is at 0.70 so far in 2016, compared with 0.92 in the past 10 years, data compiled by Bloomberg show.
While most developing-nation currencies have rallied on optimism that global central banks will keep monetary policy accommodative to support growth, those of oil exporters such as Russia and Malaysia have underperformed their peers over the past month.
The MSCI Emerging Markets Index of shares fell 0.4% to 871.18, and has declined 1.4% in two days.
The gauge has risen 9.6% this year and trades at 12 times the 12-month projected earnings of its members, compared with a multiple of 16.2 for the MSCI World Index that has gained 2.4% in 2016.
All of 10 industry gauges in developing nation’s gauge dropped, led by telecommunications and energy shares.
The main equities gauge in the Philippines slumped 2%, the most since June 9, while the Hang Seng China Enterprises Index dropped 1.4%. – Bloomberg