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EM Stocks Record Worst Week Since August

Emerging-market stocks post their biggest weekly losses since mid-August as the escalating conflict in the Middle East diminishes the chances of a year-end rally.

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Bloomberg chart on EM

The benchmark MSCI equity index for developing countries fell for the third day Friday, hitting its lowest since last November, while the average yield on EM hard-currency bonds advanced to the highest since 2020.

The Polish zloty and bonds bucked the trend, rallying this week as the pro-European Union opposition was set to form the next government, paving the way for unblocking EU funds.

Markets are under pressure as oil trades around $90 a barrel and gold approaches $2,000 an ounce amid attacks on US bases in Iraq and Syria, with Israel’s shekel depreciating for the 10th day in a row.

At the same time, foreign investor outflows from China continued due to concerns about the property sector and the economy’s recovery. All in all, EM equity losses for 2023 have exceeded 3%, on track for their third year of declines.

“The risks of an escalation of the Israel-Hamas conflict will likely dampen the conditions for what we expect to be a year-end rally,” Citigroup Inc. strategists including Eric Ollom wrote in a note to clients.


Image: EM