Month: January 2014

Why an emerging markets panic may be justified

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Despite every effort from policymakers and central bankers, the emerging markets sell-off continues – and there are more warnings that this might settle in for the long haul.

Emerging market economies are bigger and more closely linked to developed market economies than ever before and the term can seem increasingly obsolete when applied to a country like China — the world’s second biggest economy. This could mean that when faster-growth markets sneeze, more established economies like the US and Europe catch a nasty cold.

(Read more: What happens in EM (mostly) stays there: Goldman)

“The (US) economy’s reliance on private final demand will be important to the extent that US exports, which have recently been strong, eventually slow in response to a strengthening dollar and weaker growth in the emerging markets,” analysts at Deutsche Bank warned Thursday.

One of the key data points to watch out for will be import figures. Turkey and South Africa have both seen their currencies plunge in value against the dollar this week, despite aggressive action from their central banks, a sign that market confidence in their economies is falling.

(Read more: Are emerging markets on the brink of another crisis?)

A weaker currency in Turkey and South Africa will mean that businesses there will find it harder to afford goods and services from other countries. And in turn this will hit the order books of the world’s biggest economy — the US.

“The fact that currencies weakened despite policymakers responding to the sell-off opens up the potential for a new and more dangerous phase of the crisis,” Neil Shearing, chief emerging markets economist at Capital Economics, told CNBC.

The US Federal Reserve Open Markets Committee’s decision to continue scaling down its asset purchase program, despite the effect such action has had on emerging markets in the past, suggests that it is not concerned about the potential contagion for the US.

(Read more: Did the Fed leave emerging markets out in the cold?)

Turkey and South Africa’s combined global gross domestic product (GDP) only amount to around a tenth of the US’s. But a slowdown in more than one of the bigger BRIC (Brazil, Russia, India, and China) countries, which have tripled their share of global GDP in the past 15 years, would have a much bigger impact.

China is experiencing rising wages and slowing growth, together with increased worries about the size of its banking sector and whether that sector is in the middle of a credit bubble. Close to half of all private credit in China is up for refinancing in the next year, according to Morgan Stanley calculations. Harsher conditions for borrowing could mean further belt-tightening and slowing growth in China’s demand for western goods.

But Mark Mobius, the emerging markets champion who is chairman of Templeton Emerging Markets Group, has stayed optimistic amid the current turmoil.

“Emerging markets’ economic growth rates in general continue to be at least three times faster than those of developed markets; emerging markets have much greater foreign reserves than developed markets; and the debt-to-GDP ratios of emerging market countries generally remain much lower than those of developed markets,” he argued.

– By CNBC’s Catherine Boyle. Twitter: @cboylecnbc

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Has the Fed left emerging markets out in the cold?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Just because the US Federal Reserve did not mention the recent emerging-market volatility following its latest meeting it doesn`t mean it`s not watching the turmoil closely, analysts say.

The Fed on Wednesday concluded a two-day policy meeting with a decision to unwind its massive monetary stimulus program by a further USD 10 billion.

Contrary to some expectations, the central bank did not address the sharp sell-off in emerging markets from Turkey to Argentina and South Africa, triggered in part by the scaling back of Fed stimulus that has helped underpin flows into such markets in recent years.

“From the viewpoint of domestic US economic conditions the statement is completely anodyne. From the point of view of emerging markets, the Fed has just said `hasta la vista, baby,`” Steven Englander, global head of G10 currency strategy at Citi, said in a note.

US and Asian equity markets fell sharply following the Fed`s move. Asian currencies headed back towards their recent lows against the dollar and the Turkish lira  slipped 0.2 percent to 2.26 to the dollar, having strengthened to as much as 2.16 on Wednesday as a sharp hike in Turkish interest rates a day earlier offered the battered currency some respite.

Against a backdrop of sharply weakening currencies and heightened concerns about an outflow of foreign cash, central banks in India, Turkey and South Africa have all raised interest rates this week.

“There was no mention of emerging markets in their (the Fed`s) statement. From a US perspective, what`s going on in emerging markets so far is not going to have a significant impact on the US economy,” said Mark Zandi, chief economist at Moody`s Analytics.

“My sense is that the Fed has emerging markets on their radar screen, but so far it`s not signaling any major problems for them to rise to the level to be in their statement,” he added.

In short, say analysts, the fact that the Fed omitted a mention of the emerging-market turmoil in their statement should be taken as a sign that they do not view the current bout of turmoil as a systemic risk that could hurt the U.S. economic outlook.

“I was not surprised that the Fed didn`t comment on emerging markets because it was a recent development and doesn`t represent a sustained development,” Peter Bain, president and CEO at Old Mutual Asset Management in Boston told CNBC Asia`s ” Cash Flow .”

Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial, added this: “Just because they were not mentioned in the statement doesn`t mean the Fed has closed its eyes to what`s happening in emerging markets.”

“Central banks have regular contact with each other and if the turmoil in emerging markets was viewed as systemic then the Fed would act. Right now the perception is that the problems are confined to individual markets such as the Ukraine, Turkey or Argentina,” she added.

– Reporting by Dhara Ranasinghe; Follow her on Twitter at @DharaCNBC

Copyright 2011 cnbc.com

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Who downs the most red wine?Hint: Not France

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China has topped France and Italy to become the world’s biggest consumer of red wine, according to a study by International Wine and Spirit Research commissioned by Vinexpo.

Chinese consumers downed 1.865 billion bottles of red wine last year, contributing to a 136 percent rise in consumption over the past five years, the survey released on Tuesday showed.

(Read more: Is China causing a global wine shortage?)

The US remained the world`s biggest consumer of all types of wines. The latest data on red wine consumption shows that China has pushed traditional wine-drinking countries France and Italy into second and third place respectively.

China consumed 155 million nine-liter cases of red wine in 2013. France consumed 150 million cases and Italy consumed 141 million cases.

(Read more: Sotheby’s crowns its king of fine wines for 2013)

Consumption of wine and spirits in China, the world`s second biggest economy, has risen sharply in recent years alongside an increasingly affluent consumer society.

And analysts say red, viewed as a lucky color in China, helps explain a preference for red over white wine.

In fact, China`s growing thirst is contributing to the risk of a global wine shortage, Morgan Stanley said late last year.

(Read more: ‘Diddy’ duets with Diageo for tequila takeover)

The data from VINEXPO was released ahead of an Asia-Pacific exhibition that will be held in May in Hong Kong.

– By CNBC.Com`s Dhara Ranasinghe;Follow her on Twitter @DharaCNBC

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

After Fed, the focus shifts to slump in emerging markets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The focus shifts back to emerging markets Thursday after the Fed on Wednesday announced a second tapering of its bond buying program, reaffirming that the days of easy money are coming to an end.

The Fed’s move to trim another USD 10 billion from its once-USD 85 billion-a-month program was expected as a small step forward. But for emerging markets, adjusting to a world with less Fed liquidity has created pain — particularly in those with current account deficiencies, weak currencies and inflation.

(Read more: Fed decides to taper)

When the Fed statement was released at 2 p.m. ET, stocks were already lower on the day, responding to a reversal in emerging markets as traders worried that recent central bank moves would not be effective. The market then took another leg lower, with the S&P 500 falling 1 percent to 1,774 and the Dow down 1.2 percent to 15,738.

“There was a bit of chatter that they would potentially stop the [taper] process,” said Barry Knapp, head of portfolio strategy at Barclays. But it was not a widely held view that the Fed would pause because of emerging market weakness, he added, and the equities market overreacted to the Fed news.

(Read more: Markets do battle with world’s central banks)

“We’re back in the mode where we have to pay attention to what’s happening overnight because the stressed countries that ran big current account deficits are going to be under pressure,” he said. “It’s a positive that China’s going to be closed for a week.”

Overnight HSBC final PMI for China will be key after a report last week that showed manufacturing activity contracting spooked markets worldwide. China is closed starting Thursday, and official PMI is reported Friday.

China’s growth fears fed into concerns about individual emerging markets including Turkey, Brazil and Argentina.

Traders are also watching US data Thursday, including weekly jobless claims and fourth-quarter GDP at 8:30 a.m. ET. Economists are expecting GDP growth of 3.2 percent or better.

(Watch: The Fed and emerging markets)

Joseph LaVorgna, chief US economist at Deutsche Bank, expects to see 4 percent growth in the fourth quarter, well above consensus but just below the third quarter’s 4.1 percent.

“The economy looked pretty healthy in the second half, and the old habits of perpetual pessimism will die hard,” he said. The first quarter may be another story, with bitter cold and snow potentially slowing construction and other economic activity.

“Weather considerations aside, the trend looks good,” said LaVorgna. There is also pending home sales data Thursday at 10 a.m. ET.

Traders will be watching a high volume of earnings, from Exxon Mobil, 3M, Royal Dutch Shell, Visa, Celgene, Colgate-Palmolive, Northrop Grumman, Pulte Group, Time Warner Cable, Beazer Homes, Viacom, and dozens of others before the bell.

Amazon and Google report after the close, as do Chipotle, JDS Uniphase, McKesson, PerkinElmer, Wynn Resorts, Chubb and PMC-Sierra.

Earnings season was seen as a potential minefield for equities by traders expecting a correction, but it has been fairly positive, with earnings growth at about 9 percent so far, according to Thomson Reuters. Seventy-two percent of the S&P 500 companies that have reported came in above earnings estimates, and 68 percent beat revenue estimates, according to Thomson Reuters.

Knapp said he expects stocks to remain under pressure, though.

“When they [the Fed] reach the inflection point where they stop easing, the market corrects,” he said. “I don’t think it’s a straight shot down. … It usually takes a couple months for it to play out. I could see it go to around 1,700.”

From a technical perspective, action in the S&P 500 could be signalling more downside.

“The longer we stay below 1,800, the more conviction sellers will have to break through the 100-day, which stands around 1,766, and then possibly break down to the 200-day, which we haven’t visited since 2012,” said Scott Redler of T3Live.com.

(Watch this: Cashin: Stocks almost went off a cliff)

“We’re at an inflection point,” said Redler, who follows the market’s short-term technical moves. The 200-day moving average is 1,705.

“The market has come in about 4 percent off the highs, and traders had targeted 1,770,” he said. “We saw a brief bounce off that Monday, and there was not much conviction behind it, which to me makes it seem the market is confused.”

Redler noted the 1,770 level was also the low Wednesday.

“We basically danced around Monday’s low and didn’t have enough power to break below it, but it didn’t seem the bulls had the ability to take a stand there—the market feels vulnerable,” he said.

While stocks looked dicey to traders Wednesday, bulls in the bear market found reasons to be happy.

The 10-year Treasury moved to 2.67 percent, a level it last saw in November.

“What we’re doing in the market is not about the Fed,” said David Ader, CRT Capital’s chief Treasury strategist. “I think this action is and continues to be largely about the submerging market activities.”

There was also an outside day in the 10-year yield, he said, meaning that the yield was higher than the prior day’s high and the low was lower than the prior day’s low.

“And the close was lower than the prior day’s low,” Ader said. “You’ve extended the range up, and you’ve extended the range down, and the close is lower than the prior day’s low. … That’s bullish, and we’ve had three of them and they were all high-volume days.”

The move was about positioning in a market where there was a huge short position, he said, and not so much about a flight to safety.

Speaking of shorts, short covering helped fuel an almost 11 percent move in the March natural gas futures contract, which settled at USD 5.465 per million British thermal units.

“People were thinking the gas market matured, and this kind of price volatility wasn’t going to happen,” said Gene McGillian of Tradition Energy. “It doesn’t appear to be the case.”

The action was in the two front month contracts, he said.

“The weather over the past several weeks has spurred the rally,” McGillian said, noting that the expiring February contract also soared. “That suggests there must be some player who has been caught,”

There was also a widening in the March-April spread, known as the widow-maker, he said.

—By CNBC’s Patti Domm. Follow her on Twitter @pattidomm

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Obama’s speech was ‘small ball’: Paul Ryan

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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House Budget Chairman Paul Ryan told CNBC on Wednesday that President Barack Obama’s State of the Union address didn’t contain any new ideas and said the president should not be taking credit for the US natural gas boom.

In an interview on “Squawk Box,” the former GOP vice presidential candidate referred to the speech as “small ball,” and added that the president’s promise of executive orders goes against the Constitution.

Obama said in his State of the Union address Tuesday night that he’s “eager to work” with lawmakers. But he vowed to bypass a divided Congress and take action on his own to bolster the nation’s middle class and close the nation’s wealth gap. He promised executive orders on an increase in the minimum wage for federal contract workers, creation of a “starter savings account” and new fuel efficiency standards for trucks.

Read more: Obama renews long-standing, unmet economic proposals

While Obama was “less adversarial” in his speech this year, Ryan said the president should not have taken credit for the North American natural gas boom because his administration’s stance on federal lands has been “doing a lot to frustrate this development,” such as dragging out the decision on the proposed Keystone XL pipeline.

“This is a highly regulatory president. Especially on energy, he’s going overboard on regulations,” the Wisconsin Republican said. “Look at coal, 60 percent of the power in Wisconsin comes from coal power plants. [Obama’s] got a new regulation coming out later this year that could put those out of business.”

“We should not assume that North America has all this shale,” he said. “It’s just we’ve discovered it first because we have capital, good infrastructure. We’ve already done the work. Let’s realize it. Let’s dominate for these 20 years.”

In the official GOP response Tuesday night, House Republican Conference Chairwoman Cathy McMorris Rodgers stressed the importance of free markets, while saying Americans don’t need the government making decisions for them.

Ryan built on those themes in the CNBC interview, advocating an across-the-board tax rate decrease. “The Ways and Means Committee is going to be advancing legislation. We hope that the president is a productive partner in that. We know there are Senate Democrats who agree with us.”

Ryan said the labor force participation rate right now is horrible, and that more jobs need to be created to get unemployed Americans back to work.

On the issue of whether he’s going to run for president in 2016, Ryan said he hasn’t decided.

“I’ve got an important job to do. We’re in the majority here in the House. We’ve got to make this divided government work, as uncomfortable as it can be,” he said. “Then after this session I’m going to keep my options open and figure it out then.”

When asked how old he was, Ryan said, “I turned 44 today.”

—By CNBC’s Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Who will pay for the emerging market mess?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Renewed fears of a crisis in emerging markets have come to a head in recent weeks, interrupting chatter about a pick-up in global growth, but which parts of the world are most exposed to further trouble in the region?

Last week, sharp declines in the value of the Argentine peso triggered a fallout across emerging market currencies, while worries over China’s growth and credit issues and ongoing concerns over further tapering by the Federal Reserve exacerbated the selloff.

The selloff prompted Turkey’s central bank to hike interest rates in response on Tuesday, in what some have described as a panic move to try and restore anxious investors.

According to analysts at investment bank Barclays, if the volatility escalates, the euro area will be the most exposed, with Japan close behind followed by the US.

Barclays divided emerging markets into two groups, the ‘stressed group’: Argentina, Brazil, India, most of ASEAN, Russia, South Africa, Turkey and Venezuela, which have seen a weighted 16 percent fall in their currencies over the past 12 months, and a more resilient group, made up of the remaining emerging markets whose FX rates have been relatively stable.

Looking at the ratio of exports to gross domestic product (GDP), Europe had a 3.1 percent exposure to these stressed economies in 2013, Barclays said, while Japan had 2.4 percent and US 1.3 percent.

While the euro area was the most vulnerable, the Barclays analysts pointed out that as long as the current emerging market weakness was contained to these stressed economies, the G3’s GDP rates should not be majorly impacted, as the regions are more exposed to the stronger emerging economies.

Throwing a spanner in the works, however, is heightened concern about China, Barclays said, pointing out that if China were to seriously reduce its imports from the G3 economies it would have more significant implications.

Other analysts also told CNBC that China remained the largest threat to the potential for an escalated emerging markets crisis.

“The question is how will this effect global financial markets? Will all of these mini crises in emerging markets have a big spillover effect on the developed world?” said Boris Schlossberg, managing director of BK Asset Management. “And to me, the answer doesn’t lie with Turkey or Argentina, which are small, isolated economies. It’s a question of whether China becomes a big problem.”

Analysts at UK-headquartered research house Capital Economics said they doubt the emerging market selloff would have much impact on the global economy, however.

In a note published on Tuesday, the analysts gave three reasons why they did not see the recent selloff escalating into a crisis: developed markets are now in a stronger position than they used to be; the emerging markets with the most influence on the developed world have not been too affected; on a historic basis, major downturns in the emerging world have not had a big effect elsewhere.

“Even if the emerging market instability worsens it may have a silver lining for advanced economies by adding to the downward pressure on global commodity prices and thereby helping to keep inflation (and thus interest rates) low,” said Andrew Kenningham, senior global economist at the firm.

Meanwhile, a note from Credit Suisse published Tuesday said some economies in Asia, particularly those hit hard amid last year’s tapering panic, such as India and Indonesia, were now more well positioned to withstand another intense bout of volatility.

“This is not to suggest that either country would be unaffected by a risk-off episode…but the extent of the damage for a given shock is likely to be less,” said Robert Prior Wandesforde, head of Southeast Asia and India economics at Credit Suisse.

Turkey’s shock 425 basis-point rate hike Tuesday helped calm volatility in global equity markets and currencies on Tuesday. The Turkish lira rebounded to 2.2 to the dollar from 2.253, while Dow futures spiked 150 points in early trade on Wednesday.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

DM equities will be ‘last man standing’: Nomura

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Stocks from developed nations will be the “last man standing” in a bear market that’s due to arrive by the end of the year, warns Bob Janjuah, Nomura’s uber-bearish strategist.

The extra liquidity flooding the world’s financial markets from the quantitative easing (QE) programs from central banks including the U.S. Federal Reserve have caused a domino effect of falling asset prices, Janjuah said.

The first asset class to fall, he said, was commodities in 2011. Next was emerging markets. Coming up, Janjuah predicts, will be housing and then stocks in 2014/2015.

(Read More: Stand by…a hefty drop’s on the way: Nomura’s Janjuah)

“As 2014 unwinds, the data will I think expose policymakers as falling far behind the curve, persisting with a policy tool, whose ‘success’ is increasingly narrowly based and which is failing to deliver broad-based inflation, growth or any other meaningful positives to the real economy,” Janjuah said in his latest client note on Monday.

 “I think later in 2014 the themes of deflation and recession will dominate, and in the middle of this it will I think be painful to watch Ms Janet Yellen and other policymakers flip flop and attempt to extract themselves from their policy errors.”

(Read More: S&P 500 to Dip 5-10%, Then Soar: Nomura’s Janjuah)

For the S&P 500, which stood at 1,781 points before the open on Monday, Janjuah sees two potential scenarios playing out in the next few weeks.

If the index closes above 1,800 this week or next, then he sees it approaching 1,950 level by April. However, following last week’s emerging market sell-off, Janjuah’s most likely scenario is for the S&P 500 to fall below 1,770 in the next two weeks. If this happens, he said, then the risk/rewards favor a meaningful risk-off move to the low-1,700s during February, with even 1,650 and 1,600 possible.

“In this more bearish short-term scenario, I’d expect Ms Yellen and her late February testimony on the Hill to be a catalyst for a bullish turnaround – if the S&P drops 100/150 points in the next two-three weeks, I suspect that she will then send out extremely dovish signals, which the market will not be able to resist responding to!,” he said.

 (Read More: ‘Loose Cannon’ Yellen as Fed Chief Scares Market: Janjuah)

“Either way 2014 is already proving to be more challenging…overall I think the end of the post-2009 QE-driven bull is at hand (or very soon to be at hand) and the onset of the next significant (post-QE) deflationary bear market, which I think will run deep into 2015, should now begin to guide all investment decisions.”

Janjuah, no stranger to gloomy predictions, has made several large calls in recent years. In November, he said that the end of 2013 till the end of the first quarter of 2014 would be a buying window followed by a 25 percent to 50 percent sell-off over the last three quarters of 2014. He also predicted an interim sell-off in November which never materialized.

In a research note published in late March, the long-term bear expected a large dip for the S&P 500 which also never fully played out. However, the strategist predicted that the market would then soar higher during the rest of the year.

In August 2012, he said that the S&P 500 would likely to fall by 20-25 percent over the following three months ahead of the US elections – again that failed to prove accurate.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Are emerging markets on the brink of another crisis?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Heavy selling across emerging market currencies starting late last week caught many investors off guard, but is the market facing a repeat of last year’s brutal selloff?

On Friday, the Argentinean peso posted its largest one-day decline in more than a decade, while other emerging market currencies, including the Turkish lira, the South African rand and the Brazilian real, also took a battering.

The selloff spread to emerging market currencies in Asia on Monday morning, as the Malaysian ringgit hit a fresh four-year low against the dollar, the Philippines peso hovered close to its four-year low and the Indonesian rupiah hit a two-week low against the greenback. Global stock markets also took a hit, leading to a sharp selloff on Wall Street’s three major indices on Friday and across Asian equities on Monday morning.

(Read more: Did the Fed sink the emerging markets?)

The selloff has proven a stark reminder of the pain emerging market currencies saw last year, when the Federal Reserve’s first mention of tapering sent the currencies of countries with large current account deficits, like India and Indonesia, tumbling to historic lows. Analysts told CNBC they expected continued weakness over the coming weeks.

“The pressure on emerging markets is something we are going to see more and more in the coming weeks,” Xavier Denis, economist & strategist at Societe Generale Private Banking, told CNBC’s Asia Squawk Box on Monday.

“I think that the normalization [of monetary policy] from the Fed will continue to put downward pressure on emerging market currencies and emerging markets overall,” he added.

(Read more: It’s getting ugly in emerging market currencies)

Meanwhile Kathy Lien, managing director at BK Asset Management, said she expected EM currencies to see a further 5 percent correction, before stabilizing.

Although continued worries over the Fed’s withdrawal of stimulus is seen as a key driver for the current selloff, analysts say a number of other factors are at play. In Asia, for instance, weak Chinese data has raised concerns about the strength of the global recovery, while political tensions in Thailand have damaged sentiment.

Sébastien Barbe, head of emerging market research and strategy at Credit Agricole, said current selling is being driven by different factors to last year’s selloff, however.

“This time, EM currencies are falling even though U.S. yields are decreasing. We believe this reflects the fact that EM FX markets have shifted from FOMC-centric mode to being more focused on intrinsic EM weaknesses,” he said.

“In our view, three of these weaknesses (China, external liquidity pressure and political jitters) could keep the pressure on EMs in the next couple of weeks,” he said, adding that they would stabilize afterwards, possibly helped by central bank action.

Other analysts, seemed less concerned about the possibility of another emerging markets “crisis,’ arguing that last year’s theme of differentiating between the weaker and stronger economies in the region was set to return.

“Market turbulence in Turkey, Ukraine and now Argentina has led to talk of a new crisis sweeping emerging markets (EMs). But the emerging world has become a far more diverse place over the past decade,” said Melanie Debano, economist at U.K. research house Capital Economics.

(Read more: Emerging market opportunity in long term: Blankfein)

“The real lesson from recent events is that the need for investors to discriminate between individual EMs has never been greater… In the past, financial crises have indeed tended to sweep from one EM to another, primarily because they shared many of the same vulnerabilities. Today, the emerging world is a very different place.”

Kelly Teoh, market strategist at IG Markets, said she expected the current selloff to trigger a mass withdrawal of funds once again highlighting domestic structural issues and politics, but she expected investors to once again start differentiating between stronger and weaker economies in the region.

“There are groups within the EM space that has current account surplus and demand for their goods which will weather this storm better. As we have seen with any selloffs, the storm has to pass before investors are willing to invest again,” she added.

— By CNBC’s Katie Holliday: Follow her on Twitter @hollidaykatie

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian equities tumble on emerging market, China fears

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian equities kicked off the week with sharp losses as fears over emerging markets continued to spook investors. Markets in Australia were closed for a public holiday.

On Friday, all three major US indices closed down 2 percent as emerging-market currencies took a beating amid growing worries about slowing Chinese growth and U.S. monetary policy.

“The EM currency selloff is causing a contagion effect where Asian markets are opening lower. The question is whether the selloff in the EM countries, Turkey, Ukraine and Argentina will have a sweeping effect on the others such as EM Asian countries. There are groups within the EM space that has current account surplus and demand for their goods which will weather this storm better,” wrote Kelly Teoh, market strategist at IG in a note.

Meanwhile, a Forbes report that the People’s Bank of China has halted bank cash transfers ahead of the upcoming Lunar New Years holiday sparked fears of a nation-wide liquidity crunch.

Japan’s benchmark index fell to its weakest levels since November, extending Friday’s sharp 2 percent fall, after the yen briefly hit a new seven-week high at 101.77 per dollar in early trade. As global risk appetite fell, investors bought into safe havens like the Japanese currency.

Index heavyweights SoftBank and Fast Retailing fell over 2 percent each while blue-chip exporters like Sharp, Sony, Nikon and Komatsu skidded over 3 percent each.

Disappointing data also weighed on sentiment. The economy recorded a record trade deficit for 2013 due to a weaker currency and higher fuel import costs, which saw imports gain an annual 24.7 percent in December compared to a 15.3 percent annual gain in exports.

Emerging markets in focus

Malaysian shares fell over 1 percent while the ringgit hit a new four-year low against the dollar. In the Philippines, the benchmark index lost over 2 percent and the peso hovered near Friday’s four-year low against the greenback. Indonesian shares tumbled nearly 3 percent while the rupiah hit a new two-week low against the dollar.

Thai markets will be watched after anti-government protesters in Bangkok increased their efforts to disrupt advance-voting for next week’s election. Violence erupted on Sunday after a protest leader was shot and killed in a confrontation.

China shares tumble

Hong Kong shares tumbled over 2 percent while the benchmark Shanghai Composite eased 0.6 percent after Forbes reported that the People’s Bank halted bank cash transfers.

“It depends whether or not these halted cash transfers also apply to domestic banks. If it did, there’s a number of questions you’d have to to raise. Are there really enough liqudity issues or did somebody just forget to print enough money? If it doesn’t apply to domestic banks, it may be a marginal or isolated issue,” said Tony Nash, vice president of IHS.

Hong Kong-listed ICBC fell over 2 percent on reports that it may be close to buying a controlling stake in Standard Bank’s commodities and forex trading business in London.

Kospi falls 1.7%

South Korean shares opened at a six-month low while the Korean won fell to a five-month low. Blue-chips Hyundai Motor, Kia Motors and Samsung Electronics fell over 1 percent each while investors shrugged off data that showed consumer sentiment hit a three-year high in January.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Russia’s Putin acting out of weakness: Soros

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The US and Russia need to better understand each other because Russian President Vladimir Putin is becoming “more regressive at home and more aggressive abroad,” billionaire investor and philanthropist George Soros told CNBC.

“Putin is acting out of weakness because he was quite popular, and then the switchover between him and [Dmitry] Medvedev really turned the Russian population against him,” Soros said in an interview that aired Friday from Davos, Switzerland. His pointed words come as Russia deals with terrorist threats in advance of the Sochi Winter Olympics, which opens in two weeks.

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Soros did say that Putin’s intervention in the Syrian chemical weapons crisis has “paid off, but he can’t really convert it into a real change in Russia’s standing in the world without dealing with the humanitarian issue [in Syria].”

Syria’s civil war has already killed at least 130,000 people, driven up to a third of the country’s 22 million people from their homes, and made half dependent on aid, including hundreds of thousands cut off by fighting. Talks to end the 3-year-old war were scheduled to start Friday in Geneva.

“I think in many ways [Syrian President Bashar] Assad himself and the regime has committed such violations against humanitarian law that they can’t really remain in power,” Soros said.

—By CNBC’s Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC. Reuters contributed to this report.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow