Yesterday, stocks in most developing markets fell to their lowest levels in over a month as risk appetite decreased following an unexpected interest rate decision by China. Additionally, Ukrainian bond yields rose after a credit rating downgrade.
The MSCI index, which tracks equities in emerging markets, dropped 0.6 percent, marking its ninth decline in ten days but still maintaining gains of over 4 percent for the year.
A currency index increased by 0.2 percent against a weaker dollar, with investors awaiting economic growth data from the US later in the day.
The People’s Bank of China (PBOC) surprised the market again with an unplanned lending operation at significantly lower rates, aiming to boost the economy. This move unsettled investors, causing Chinese stocks to fall by 0.5 percent.
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Despite this, China’s offshore yuan strengthened to levels last seen in early May, while bond yields remained stable.
Elias Haddad, a senior markets strategist at Brown Brothers Harriman, commented, “The PBOC is trying to support China’s sluggish economic activity. However, unless China addresses its massive debt (over 300 percent of GDP), it is likely to face weaker growth in the coming years.”