EMERGING MARKETS-Stocks, FX sag as high oil prices, US rate worries weigh

Emerging market stocks languished at a six-month low on Thursday as investors wrestled with the prospect of higher U.S. borrowing costs and a rise in crude prices depressed currencies of oil importing nations. MSCI's gauge of emerging markets equities fell by 0.5% by 8:54 GMT, while currencies edged 0.1% lower, in the red for the fourth day in a row.

Emerging market stocks languished at a six-month low on Thursday as investors wrestled with the prospect of higher U.S. borrowing costs and a rise in crude prices depressed currencies of oil importing nations.

MSCI's gauge of emerging markets equities fell by 0.5% by 8:54 GMT, while currencies edged 0.1% lower, in the red for the fourth day in a row. China's blue-chip CSI 300 Index slipped 0.3% ahead of a week-long holiday, and Hong Kong equities hit a 10-month low, pummelled by growing concerns about China's indebted property sector.

Trading in shares of China Evergrande Group was suspended after a report that the developer's chairman was under police watch. Renewed worries over China's property sector this week have dealt a further blow to emerging market assets already pressured by hawkish views from the Federal Reserve that have sent U.S. Treasury yields to 16-year highs.

"Emerging markets depend quite much on rates in western economies and we are seeing profits from stock investing have been going out and there is a clear hunt for yields," Vladimir Miklashevsky, chief analyst at the East Office of Finnish Industries Oy, said. A jump in oil futures to their highest in more than a year on Thursday pressured the currencies of top crude importers in the region, with the Thai baht down 0.3%.

India's rupee was flat, with likely support from the Reserve Bank of India keeping the currency afloat, per traders. A decision on whether FTSE Russell includes India in its emerging markets government bond index is expected later in the day.

Turkey's lira, the currency of another big oil importer, slipped to 27.42 per dollar. Investors also awaited minutes of the central bank's Sept. 21 monetary policy meeting, when it raised its key rate by 500 basis points to 30%. A poll showed economists expect the country's annual inflation to rise to 61.7% in September due to the lira's continued decline and recent tax hikes.

South Africa's rand was also muted against the dollar ahead of the release of the producer price index (PPI) and other data that will give clues on the health of Africa's most industrialised economy. For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX

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