Emerging market stocks, FX fall as China export slump weighs

Emerging market stocks and currencies tumbled on Friday to about three-week lows, hurt by abysmal Chinese export data, which heightened fears of a slowing global economy and left investors in the developing world lining up at the exits.

Data showing the manufacturing giant’s exports fell 20.7% in February pointed to a further slowdown in China and spurred market participants into scaling back risky bets to pile into safe havens such as Japan’s yen.

“While the Lunar New Year holidays resulted in large swings in the trade data, the moderation trend in China’s export is clear,” wrote UOB Economist Ho Woei Chen and Market Strategist Quek Ser Leang in a note, adding the data is starkly different to the 24.4% export growth seen in the same period last year.

MSCI’s index of developing world stocks fell 1.3% in its worst performance in close to three months, bogged down by sliding equities in index heavyweight China.

Chinese blue-chips dropped 4% while stocks on the Shanghai Composite fell 4.4%. Their more liquid peers in Hong Kong were not spared as they clocked their worst day since early 2019 with a 1.9% slide.

MSCI’s emerging market currencies index slipped 0.3% to wipe away all gains made over the last two-and-a-half weeks, with China’s yuan sinking to a two-week low.

Commodity powerhouse South Africa‘s rand was 0.25 softer, while a 0.7% fall for local stocks set them on course for their lowest closing level in more than two weeks.

Turkish stocks fell 0.8%, while the lira continued its decline due to worries over a possible deterioration in ties with Washington over Ankara’s push to buy S-400 missile defence systems from Russia.

Russian stocks did not change hands on account of a holiday.

In emerging Europe, Romania’s leu and Poland’s zloty weakened against the euro.

Central and eastern Europe’s economies generally rely on exports to the euro zone and data on Friday showed industrial orders in Germany, the zone’s top economy, unexpectedly fell in January.

The European Central Bank cut its growth forecast on Thursday and announced a new round of cheap loans to banks, deepening investors’ concerns about the outlook for the global economy.

Hungary’s forint was an exception in the region, firming 0.2 percent against the common currency after data showed core inflation in February quickened to a six-year high.

The data heightened the possibility of Hungarian borrowing costs being lifted off all-time lows, where they have been for more than two-and-a-half years.