Widespread selling of Chinese assets has spilled over into emerging markets, hindering growth and threatening to depreciate everything from stocks and currencies to bonds.
Following the re-expansion of China’s coronavirus infection and the government’s strict containment policy, there has been widespread concern that the effects of China’s lockdown will spread to the world through reduced demand and disruption of the supply chain. This has led to the sale of not only Chinese currencies, bonds and stocks, but also assets of emerging economies that are heavily dependent on trade with China.
As a result, EM assets have fallen the most in the last two years, and concerns over China have led to a plunge in EM bonds, currencies and equities.2015 meltdownIt has fallen into a state very similar to. Since that year, China’s influence on the world economy has continued to grow. China is now the world’s largest purchaser of resources, and its slump means that it could have a further impact on raw material exporters and their markets.
“Given China’s importance to the global supply chain and growth prospects, if China’s growth becomes even more disappointing, William Blair Investment Management’s asset managers Johnny Chen and Clifford Lau said: It will lead to an increase in ripple risk. ” “I think countries with strong trade relations with China are the most vulnerable,” he said.
The offshore yuan recorded the largest decline in at least 12 years on a monthly basis. The MSCI Emerging Markets Currency Index, which has a weight of about 30%, has also been lowered. The 30-day correlation between the index and the yuan has risen to its highest level since September last year, highlighting the currency’s impact on emerging market sales.ShanghaiPanic selling spread to bonds and stocks after the announcement of the first death in the current corona expansion phase.
In the foreign exchange market, the South African rand has eliminated its four-month rise in just two weeks. In addition, the Brazilian real, Colombian peso, and Chilean peso have been lowered significantly. Carry losses also expanded, recording the largest loss since November last year.
news-rsf-original-reference paywall">Original title:
news-rsf-original-reference paywall">China Contagion Threatens to Derail the World’s Emerging Markets(excerpt)