Rising global bond yields knocked emerging markets lower yesterday, with stocks down for the second straight day and local bond markets broadly following the lead of their developed peers.
US Treasury yields are at 10-month highs while German yields are the highest since end-October, causing some wobbles on world equity markets.
MSCI’s emerging equity index slipped 0.4%, edging further off 6-1/2-year highs.
Losses also stemmed from a 1.4% fall in emerging tech shares, led by a 3% slump in Samsung Electronics following disappointing earnings guidance.
Chinese mainland shares were the exception, up for a ninth day running to hit seven-week highs.
“We are positive on emerging markets but we were not expecting such a performance (since the start of 2018). So we would not be surprised to see some respite. We remain constructive but we could see a temporary pause in the short term,” said Guillaume Tresca, a strategist at Credit Agricole.
Emerging European shares also fell, with Turkish stocks losing more than 1% while bond yields edged higher across the region. Polish 10-year yields hit two-week highs as investors waited to see what clues the central bank could provide on the interest rate trajectory.
The bank is seen leaving rates at 1.5%, but Romania recently became the second country in the region to raise rates, indicating that policy tightening momentum is building.
Czech and Hungarian yields rose around 1-2 basis points.
JPMorgan’s GBI-EM index of local debt showed yields closing near one-week highs on Thursday though dollar bonds shrugged off higher US yields, with average premia over Treasuries hitting new 3-1/2-year lows.
