A broad risk aversion hit emerging market currencies and stocks on Tuesday, as fears about the fallout from escalating protests in Hong Kong and one of the worst selloffs in Argentina's markets pushed investors to look for safer assets.
The MSCI's index of emerging market stocks was down about 1%, on course to erase all of its meagre gains so far this year, with heavyweight Asian stock markets suffering sharp losses.
The Hang Seng stock index touched its lowest level since early January as protests continued in Hong Kong against the now-suspended bill that would have allowed extradition to mainland China for those facing criminal charges. It has fallen 6% since the protests began in June.
Stock markets in China also dropped nearly a percent after data showed banks extended fewer-than-expected new loans in July, while its central bank lowered its official yuan midpoint for the ninth straight day to a fresh 11-year low.
Argentina become the latest focus of worries after primary elections held on Sunday showed a surprisingly strong performance by the opposition candidate Alberto Fernandez and his running mate, former President Cristina Fernandez, raising fears over a potential return to their interventionist policies.
The peso closed 15% weaker at 53.5 per U.S. dollar on Monday after plunging some 30% to a record low earlier in the day, while the local Merval stock index closed 31% weaker.
Refinitiv data showed Argentine stocks, bonds and the peso had not recorded this kind of simultaneous fall since the South American country's 2001 economic crisis and debt default.
"The global environment is quite weak at the moment, with Hong Kong protests and the U.S.-China trade war escalating. I expect the Argentine pressures to continue for the next few days, if not weeks," said Jakob Christensen, head of EM research at Danske Bank.
Adding to worries, Singapore slashed its full-year economic growth forecast as global conditions were seen worsening and data confirmed the slowest growth rate in a decade.
The Singapore dollar SGD= fell to over a two-year low against the dollar, with a 0.15% decline. The Indonesian rupiah IDR= lead losses among emerging Asian currencies with a 0.5% fall, while the Korean won KRW= and the Philippine peso PHP= dropped about 0.3% each.
A senior official at the People's Bank of China told Reuters that China's yuan is at an appropriate level currently and two-way fluctuations in the currency will not necessarily cause disorderly capital flows.
The yuan, which has fallen nearly 2.4% since U.S. President Donald Trump threatened this month to impose more tariffs on Chinese goods, weakened further above 7 per dollar.
(Reporting by Sruthi Shankar in Bengaluru Editing by Keith Weir) ((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6749 6328))
