(Bloomberg) -- Emerging-market stocks fell for a second day as concerns accumulated over China’s response to the weakness in the world’s no. 2 economy.
MSCI Inc.’s benchmark EM equity gauge dropped 0.5% by 10:05 a.m. in London. That extended its two-day decline to 2.8%, the biggest two-day drop since early August. Hong Kong-listed companies led the decline in the index, with the malaise also spilling over into mainland China stocks.
The index tracking developing-nation currency returns was little changed, though eastern European currencies mostly tracked the euro lower.
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 weeklong holiday. The government announced it would hold a briefing on fiscal policy on Saturday as investors look for additional measures to stimulate the world’s No. 2 economy.
“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, wrote in a note. “Market participants expected a much larger fiscal package.”
Index Inclusions
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 dollars of inflows after an overhaul of the country’s financial market infrastructure.
Israel’s central bank is set to hold interest rates for a sixth consecutive meeting, unable to join a global easing cycle as the conflicts in Gaza and Lebanon increase inflationary pressures.
Policy makers in Hungary have also signaled that room to continue cutting interest rates at their upcoming October meeting has narrowed.
Deputy Governor Barnabas Virag cited geopolitical risks in a meeting with investors, according to people familiar with the discussion. The forint, which outperformed peers Tuesday on Virag’s guidance, dropped 0.1% against the euro Wednesday.
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