EMERGING MARKETS-Stocks slip on worry about China slowdown; South African rand falls

Emerging market stocks dropped on Tuesday on worries about an economic slowdown in China caused by COVID-19 lockdowns, while South Africa's rand fell against a firming dollar amid severe power cuts and floods.

Emerging market stocks dropped on Tuesday on worries about an economic slowdown in China caused by COVID-19 lockdowns, while South Africa's rand fell against a firming dollar amid severe power cuts and floods. The MSCI's index for EM stocks fell 0.5% for the fourth straight session, with most declines led by shares in China and Hong Kong.

Authorities in China have vowed to support the economy hit by the worst COVID outbreak in two years after data showed it slowed in March as consumption, real estate and exports were affected by harsh COVID curbs and the Ukraine war. "Mobility curbs, transportation bottlenecks, and a continuation of the current COVID-19 policy pose near-term risks to growth (in China)," said strategists at UBS, while lowering 2022 gross domestic product (GDP) growth forecast for the world's second-largest economy.

"The March dynamic - with consumption taking a bigger hit than production or investment - will extend into April." China is a significant trading partner for many developing countries, especially those in South and Central America, which sell it large amounts of raw materials, oil and industrial metals.

Market participants also worried about the spectre of monetary policy tightening in the developed world. The European Central Bank (ECB) confirmed plans last week to end its stimulus scheme in the third quarter, while hinting that an interest rate increase in July was not off the table. The ECB's plans come at a much slower pace than the U.S. Federal Reserve's, which started its tightening cycle in March.

The dollar index has been steadily climbing, while South Africa's rand slipped 0.5%. South African state utility Eskom ramped up scheduled power cuts, while floods in KwaZulu-Natal province killed more than 440 people, left thousands homeless and disrupted operations at one of Africa's busiest ports, Durban.

Turkey's lira dipped 0.2% against the greenback. Central bank data showed residential property price index (RPPI) leapt an annual 96.4% in February, surging against the backdrop of rising inflation. The Russian rouble firmed in early Moscow trade, while prices for OFZ government bonds rose to their highest since Feb. 21 on expectations that the central bank would soon cut interest rates again.

Most central and eastern European currencies were mixed against the euro on Tuesday. The Polish zloty traded in a narrow range after central banker Henryk Wnorowski was quoted saying interest rates could rise to 7.5%. For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

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