World Economy

EM Stock Selloff Abates

EM Stock Selloff AbatesEM Stock Selloff Abates

Developing-nation stocks halted a four-day slide as Chinese shares led a rebound in Asia and currencies held declines before the Federal Reserve’s policy review.

Information technology companies led gains in the MSCI Emerging Markets Index, with seven of its 10 industry groups advancing. China’s stocks reversed an earlier loss to jump the most in two weeks, spurring speculation that state-backed funds may be supporting the market after MSCI Inc. refused to add the nation’s domestic equities to benchmark gauges. The yuan erased declines, while the Philippine peso fell the most, Bloomberg reported.

“The decision by MSCI not to include Chinese A-shares was a blessing for other Asian markets as it would have shifted investors’ portfolios,” said Jeffrosenberg Tan, an associate director at PT Sinarmas Securities in Jakarta. “Brexit and the Fed meeting were the main factors over the past few days. Volatility is heightening up, and investors should closely monitor these developments.”

  Global Risks

More than $2 trillion was wiped off the value of global equities in the past week as a slew of polls indicated the UK will elect to leave the European Union in a June 23 referendum. The vote is spurring volatility before central bank policy announcements in the US on Wednesday, and Japan and the UK on Thursday. While most economists predict no policy changes, investors will closely watch the decisions for clues on future direction.

“The Fed is unlikely to hike in June, but we will be watching the forward guidance,” said Irene Cheung, a foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd.

The MSCI Emerging Markets Index rose 0.3% to 805.14 in Hong Kong, ending a four-day decline of 4.7%. Samsung Electronics Co. jumped 2.3% in Seoul, providing the biggest boost to the measure, followed by Tencent Holdings Ltd., which added 2.1%.

  China, Pakistan

The Shanghai Composite Index rose 1.5% after falling as much as 1.1%. Gainers vastly outnumbered decliners, with 1,055 shares climbing on the gauge as 10 fell. The Hang Seng China Enterprises Index added 0.5% in Hong Kong. China’s domestic equities were denied entry into MSCI benchmarks for a third time, with the index compiler saying policy makers need to make additional improvements to the accessibility of the A share market.

Pakistan’s Karachi Stock Exchange KSE100 Index surged as much as 2.9% to a record after the nation’s equities were upgraded to emerging-market status by MSCI. The country could potentially get inflows of $220 million as a result of the move, according to JPMorgan Chase & Co.

Equity benchmarks in the Philippines, India and Taiwan advanced, while those in Indonesia and Vietnam retreated.

The MSCI Emerging Markets Currency Index was little changed Wednesday following a 1.4% slide over the last four days. The Philippine peso fell 0.2%, while South Korea’s won and Taiwan’s dollar retreated 0.1% each.

Malaysia’s ringgit rose 0.1% after weakening 1.4% in three days, and the yuan was little changed.