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Emerging market shares fell sharply with Chinese stocks tumbling as their eight-month bull-run looked to be petering out, while many currencies weakened due to jitters about US interest rates and Greece’s debt crisis.
MSCI’s broadest emerging market index lost 0.8 per cent for its biggest daily loss in 11 days, while the Asia ex-Japan benchmark fell 1.3 per cent. However, both were on track for weekly gains for the first time since mid-May.
Chinese stocks tumble
In China, stocks closed more than 7 per cent lower, racking up their biggest losses in seven years as investors fretted over a crackdown on margin lending, mounting uncertainty over Beijing’s monetary policy and a recent wave of initial public offerings hitting the market.
“Our stance on China A shares is that this is probably not a dip to buy,’’ Morgan Stanley analysts wrote in a note to clients.
“In fact, we think the balance of probabilities is that the top for the cycle on Shanghai, Shenzhen and Chinext has now taken place.’’
The Shanghai Composite has still gained almost 30 per cent since the start of the year, while the Shenzhen CSI 300 benchmark has added 20 per cent.
Greek debt crisis
Meanwhile, Greece stumbling closer to a default weighed on eastern and southern European assets, with stock markets in Poland, Belgrade and the Czech Republic all slipping - the latter two on track for weekly losses.
In Athens, shares slipped 0.7 per cent.
Euro zone finance ministers will resume last-ditch talks on Saturday to either avert a Greek default next week or start preparing for a ‘Plan B’ to protect the euro zone from financial market turmoil.
Eastern European currencies also felt the pinch, trading flat to lower against the euro on the day though broadly on track for weekly gains.
Meanwhile Turkey’s lira, South Africa’s rand and the Israeli shekel all weakened against the dollar after strong US May consumer spending data on Thursday, fuelling expectations of a Federal Reserve interest rate rise.
In Russia, both the rouble and dollar-denominated stocks slipped 0.7 per cent with oil prices down 0.4 per cent on the day, while seasonal effects like lower energy exports in summer months, vacation and dividend payouts added to the pressure.
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