Emerging markets tumble with peso as Trump wins presidency
HONG KONG, Nov 9 — Emerging-market stocks and currencies slumped amid a global selloff after Donald Trump won the US presidency in a stunning upset.
The Mexican peso, a barometer of Trump’s fortunes, tumbled the most in eight years to its weakest level on record, while the Turkish lira sank to an all-time low and the South African rand fell the most in four weeks as traders dumped all but the safest assets. A gauge of developing-nation equities fell the most since September as exporters and banks provided the biggest drag on the measure. Shares in Hong Kong, Taiwan, India and South Africa paced losses.
Markets around the world were thrown into disarray after Trump pulled off a huge electoral upset to become the 45th president of the United States. Trump has put forward protectionist pledges that analysts say are likely to affect trade, including ties with Mexico and China.
“Markets were clearly unprepared for this. I think what we have seen today is only the knee-jerk reaction,” said Divya Devesh, a foreign-exchange strategist at Standard Chartered Plc in Singapore. “It’s entirely possible that risk aversion deepens in the coming weeks, leading to further selling pressure for emerging-market currencies.”
Trump, 70, was projected to be the victor early today by the Associated Press and television networks after Wisconsin pushed him over the 270 Electoral College vote threshold needed to become president-elect. When sworn in on Jan. 20, Trump will preside over a government he’s called corrupt and unworthy of trust.
“Volatility will be very high and it will be difficult for people to position themselves,” said Indra Mawira, an investment manager at Panin Asset Management in Jakarta. “It is exciting but not the kind of excitement that we are looking for. The risk that Trump’s victory may slow down the pace of a Fed rate hike might be positive for emerging markets.”
* The peso slumped 9.3 per cent to halt a four-day gain. The Mexican currency became one of the world’s most volatile ever over the past month as traders weighed the prospects that Trump could score an upset win in the presidential race and make good on pledges to renegotiate the free-trade agreement that’s transformed Mexico into an export powerhouse.
* The Hang Seng China Enterprises Index fell 3.2 per cent. South Korea’s Kospi dropped 2.2 per cent and Taiwan’s Taiex lost 3 per cent.
* Indonesian miners, which rallied earlier this week on rising metal and coal prices spurred by bets for a Clinton win, reversed those gains. The Jakarta Mining Index slid as much as 3.9 per cent. PT Adaro Energy dropped 6.4 per cent and PT Indo Tambangraya Megah retreated 4.9 per cent, while PT Vale Indonesia fell 2.7 per cent.
* Gold stocks jumped as bullion soared by the most since Britain’s Brexit vote in June. Gold Fields Ltd. surged 9.5 per cent in Johannesburg, while AngloGold Ashanti Ltd. rallied 8.8 per cent.
The MSCI Emerging Markets Currency dropped 0.5 per cent at 3:27 p.m. in Hong Kong, halting a two-day gain, as 10-day historical volatility jumped to the highest level in seven weeks.
The rand tumbled 2.3 per cent and the lira weakened 1.1 per cent, while declines in Asia were more sedate with the exception of South Korea’s won, which lost 1.3 per cent. Malaysia’s ringgit and Indonesia’s rupiah dropped at least 0.5 per cent, while the Philippine peso slipped 0.3 per cent.
Russia’s ruble retreated 0.3 per cent as Trump’s victory helped drive down crude prices on concern his protectionist policies will sap global growth.
The MSCI Emerging Markets Index fell 2.5 per cent, set for the steepest decline since June 24. Indonesian shares sank 1.5 per cent, while stocks in the Philippines, Thailand and Vietnam lost at least 0.9 per cent.
India’s S&P BSE Sensex tumbled 2.5 per cent after Prime Minister Narendra Modi’s government unexpectedly withdrew high-denomination banknotes. Indian sovereign bonds rallied, with the yield on Indian 10-year falling 13 basis points to 6.67 per cent. “It’s been a bloodbath in the markets over the last few hours with the Mexican peso suffering particularly badly as Donald Trump edges ever closer to the White House,” Craig Erlam, London-based analyst at Oanda Corp., wrote in a note to clients. “The way markets have traded over the last couple of days and positioned ahead of the vote, you would think the election was going to be a routine victory for Clinton.” — Bloomberg