Chinese stocks led emerging market shares slump

Emerging market shares slumped on Tuesday, led by a more than 2 per cent tumble in Chinese stocks, prompted by a sell-off in U.S. technology giants on fears of slowing demand.

Reports that Apple Inc had cut production orders for iPhones unnerved investors already worried about slowing global growth and trade tensions between the United States and China.

"This year has been generally a bad one for indices world over apart from the U.S. on a year-to-date basis. In particular, the tech stocks had been outperforming. So it seems almost as though the last bastion of outperformers have now come under pressure," said Chris Turner, head of EMEA and LATAM research at ING.

The MSCI index of emerging market information technology stocks dropped 1.8 per cent and spilt over into the wider EM stocks index, which declined more than 1 per cent after four days of gains.

Mainland China stocks posted their worst day in three weeks, while Hong Kong stocks gave up 2 per cent to log their biggest one-day loss in more than a week.

Chinese stock markets had been largely insulated from recent market gyrations by hopes of further stimulus measures from the government.

A decline of 0.86 per cent each for the tech-heavy indexes of South Korea and Taiwan added to broader losses.

Bourses in Turkey, Russia and South Africa fell between 0.8 per cent and 1.35 per cent.

On emerging currency markets, the Indian rupee outperformed its counterparts, hitting an 11-week high after the Reserve Bank of India said it would support small businesses and give banks more time to step up capital norms.

This follows weeks of pressure from the federal government to spur lending ahead of elections, and suggested both the central bank and the government were keen to reduce recent tensions, which had raised questions about the RBI's future autonomy and rattled investors.

The Turkish lira and the South African rand weakened 0.5 per cent each.

Hungary's forint held steady against the euro ahead of a central bank decision, which is expected to keep rates unchanged, though markets are watching closely for signals on when the next rate hike may come given the backdrop of solid economic and wage growth.

Investors will also be watching out for more fallout from Poland's banking scandal, which has seen the head of the financial markets regulator step down and the stock index fall.