Jan 22 (Reuters) – Emerging market stocks were dragged lower on Monday by concerns about China’s shaky economic recovery while currencies were subdued at the start of a week brimming with interest rate decisions from regional and major central banks.
MSCI’s index for emerging market equities .MSCIEF fell 0.6% by 0932 GMT following two straight days of gains. A measure of regional currencies .MIEM00000CUS was steady as the dollar struggled to hold on to recent gains.
After fading optimism around the likelihood of early U.S. interest rate cuts depressed sentiment towards risk-sensitive EM assets for most of last week, investors are on guard ahead of policy decisions from countries including South Africa and Turkey.
The European Central Bank (ECB) and the Bank of Japan are also due to give their verdicts on rates this week.
China’s blue-chip index .CSI300 fell 1.6%, while the yuan CNY=CFXS held steady against the dollar after the People’s Bank of China (PBOC) kept benchmark lending rates unchanged at their monthly fixing.
China’s major state-owned banks moved to tighten yuan liquidity in the offshore foreign exchange market on Monday, four sources with knowledge of the matter said.
China’s disappointing economic growth “is a drag on overall EM sentiment”, said Jon Harrison, managing director of emerging market macro strategy at TS Lombard.
“Overall, we prefer LatAm (Latin America), especially Brazil. The ongoing monetary easing will raise consumer sentiment and boost equity markets, which remain undervalued despite the gains late last year.”
Stocks in Taiwan .TWII remained a bright spot, rising 0.8% as technology shares received a boost from optimism around artificial intelligence.
Such enthusiasm, sparked by Taiwanese chipmaker TSMC’s upbeat forecast had also pushed the benchmark U.S. S&P 500 .SPX index to a record high on Friday.
The South African rand ZAR= and the Israeli shekel ILS= dipped 0.9% and 0.7% against the dollar respectively.
Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), has given initial price guidance for its benchmark-sized, dollar-denominated triple-tranche bonds, a bank document showed on Monday.
An International Monetary Fund team is currently in Cairo to discuss Egypt’s $3 billion IMF loan and reform program, an IMF spokesperson said on Friday.
(Reporting by Amruta Khandekar, editing by Ed Osmond)
