By Aline Oyamada
The flight from riskier assets in emerging markets threw up a procession of grim reminders, from the financial crash of 2008 to the taper tantrum of 2013.
The spread of the coronavirus outside of China threatened to stall global supply lines and slash economic growth, sending markets into a tailspin from India to Brazil.
The last week ended as badly as it started, with Mexico reporting the second case of coronavirus in Latin America and Nigeria announcing the first infection in sub-Saharan Africa. The number of cases also soared in South Korea and Italy, with the rest of the world overtaking China for new infections for the first time. Now, investors are running scared the epidemic will spread across the US.
“This is the fastest market correction since 2008,” said Daniel Tenengauzer, head of markets strategy at Bank of New York Mellon Corp. in New York. The recovery shouldn’t be so fast though, as economic activity remains fragile, he added.
Over the past week in emerging markets:
The benchmark MSCI stock index fell by the most since September 2011.
Bond spreads widened by the biggest amount in two years.
Every single Latin American currency tumbled, even as the Russian ruble and the South African rand led global losses.
Developing-nation companies lost more than $600 billion of their market value, according to data compiled by Bloomberg.
As if the looming threat of a global pandemic wasn’t enough, Russian bombers killed 33 Turkish troops in Syria, stoking regional tensions and sending the lira tumbling.
Here are some of the biggest emerging-market losers of a week many traders will want to forget.
South Africa
South Africa’s rand was the second-worst performer in emerging markets over the week, dropping 4.3% and extending its worst start to the year since 2008. The currency declined as a ballooning budget deficit and a warning from Moody’s about the fiscal risk added to global negative sentiment.
The nation’s benchmark stock index slid 4.5% on Friday, extending its decline since Monday to almost 11% and setting it on course for the worst week since August 1998, the year Russia’s debt default sent global markets into a tailspin.
Turkey
The last time Turkish equities had a jolt this violent was in the midst of the so-called taper tantrum, when the prospect of the higher U.S. borrowing costs and a smaller Federal Reserve balance sheet sent emerging markets plunging.
The Borsa Istanbul 100 Index slumped 10% at the open Friday, its biggest intraday drop in almost seven years as tensions between Ankara and Moscow soared after an attack on Thursday killed at least 33 Turkish troops in Syria. The index pared some its decline and closed 4% lower on the day.
India
India’s equity benchmark plunged 7% this week, the worst showing in Prime Minister Narendra Modi’s almost six years in office. The last time the Sensex fell this much was in July 2009 when a farm crisis was worsened by poor monsoon predictions.
The gauge posted similar losses several times during the 2008 financial crisis.