Developing-world stocks suffer biggest two-day loss since August

EMERGING-MARKET (EM) stocks fell for a second day as concerns mounted over China’s response to the weakness in the world’s number two economy.

The MSCI gauge for developing-nation equities ended the session 0.7 per cent lower in New York, registering its biggest two-day decline since early August. The Brazilian real paced losses among its peers amid renewed fiscal risks, while an index for EM currencies slid for a seventh session.

China’s world-beating stock rally lost steam after its economic planning agency announced weaker-than-expected stimulus measures in the government’s first briefing following a holiday. The government announced it would hold a briefing on fiscal policy on Saturday (Oct 12) as investors look for additional measures to stimulate economic growth.

“Chinese policymakers have so far failed to back up fiscal spending pledges with real money,” Elias Haddad and Win Thin, strategists at Brown Brothers Harriman, said. “Market participants expected a much larger fiscal package.”

In fixed-income markets, India’s bonds, already the best performers in Asia this year, were poised for more gains. The Reserve Bank of India eased its hawkish stance and FTSE Russell decided to add the nation to its emerging-market debt index, moves which are set to lure more foreign inflows.

South Korea will also join FTSE Russell’s major global bond index next year, paving the way for tens of billions of US dollars of inflows after an overhaul of the country’s financial market infrastructure.

In Latin America, Colombian assets came under pressure after the country’s electoral council opened a probe into Gustavo Petro’s 2022 presidential campaign, which was run by Ecopetrol chief executive officer Ricardo Roa.

Colombia’s sovereign US dollar bonds from Colombia slipped across the curve, while Ecopetrol notes due in 2043 fell as much as 2.7 US cents on the US dollar before trimming losses, according to Trace data. BLOOMBERG