EMERGING MARKETS-EM equities buckle under China COVID worries, rouble bounces off 8-month low

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KOSPI will lose 25 percent for 2022

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The rise of COVID in China is clouding the global climate

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Dollar weakness helps EM FX

By Sruthi Shankar

Dec 29 (Reuters) – Emerging market stocks fell on Thursday, with Asian bourses under heavy selling pressure as optimism over China’s easing of COVID-19 restrictions gave way to fears about the virus’ spread around the world. gave

MSCI’s EM share index fell 0.4%, set to erase two days of relative optimism over China’s dismantling of its zero-covid-19 policy.

Stock markets in Shanghai, Hong Kong, Taipei and Seoul fell between 0.4% and 1.9%. On its last trading day of the year, South Korea’s benchmark KOSPI posted a 25 percent loss in 2022, its worst annual performance since 2008.

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“The bad news with China opening up is that it will increase not only global growth, but also energy and commodity prices – hence inflation, interest rate hikes from central banks and potentially global cases of COVID, ” said Ipek Ozkardeskaya, senior analyst at Swissquote. Bank.

The reopening raises the possibility of Chinese tourists returning to shopping streets around the world but the United States, India, Italy, Japan and Taiwan have said they will require COVID tests for travelers from China.

Russia fired more than 100 missiles into Ukraine on Thursday, injuring three people, targeting the northeastern city of Kharkiv and other cities in a major bombardment, Ukrainian officials said.

The Russian ruble recovered slightly after falling to an eight-month low against the dollar on concerns that Western sanctions on Russian oil and gas could limit export earnings.

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The ruble gained 0.6 percent to 71.74 dollars, down from 72.92, the weakest since April 27.

Overall, EM currencies found breathing room when the dollar fell. South African rand, Hungarian forint and Polish zloty increased by 0.1% and 0.6% respectively.

Emerging market economies have witnessed sharp capital outflows this year, fueled by a toxic mix of aggressive interest rate hikes, a strong dollar and high inflation fueled by Russia’s invasion of Ukraine as well as disruption caused by the pandemic. .

The index of EM equities is set to exceed annual declines of 22%, its worst performance since the 2008 financial crisis, with stocks in eastern Europe at the sharp end of the sell-off.

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Its peers, down 4.4%, had their worst year since 2015 as a slump in commodity prices and slowing economic growth hit many emerging assets.

Meanwhile, yields on emerging market sovereign debt spreads, the premium investors demand for holding riskier securities than U.S. Treasuries, are down 17.6% this year, according to JPMorgan. For a GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh For a GRAPHIC on MSCI advanced index performance in 2022 , see https://tmsnrt.rs/2OusNdX.

For TOP NEWS across emerging markets

For the CENTRAL EUROPE market report, see

For the Turkish market report, see

For the RUSSIAN market report, see (Reporting by Sruthi Shankar in Bengaluru; Editing by Robert Birsel)

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