Emerging Markets Face October Slump Amid Global Uncertainties

Emerging market currencies and equities experienced significant downdrops by the end of October. Despite initial optimism due to China's stimulus measures, global uncertainties, including US elections, led to a stronger dollar. Market participants are now closely watching economic data from China, Poland, and Ukraine, as well as potential impending tariff escalations.

Emerging markets closed October with a substantial downturn as traders evaluated economic reports from China and Poland, while anticipating Ukraine's interest rate decision. MSCI's tracking index for equities in developing economies slipped by 0.4%, marking a 4.2% fall this month—their largest since January.

Currency gauges remained flat, though they were headed for a sharp monthly decline of 1.6%, the steepest in 20 months. Chinese, Indian, Turkish, South African, and several central and eastern European currencies saw downward trends, partly due to uncertainty about U.S. election outcomes and a fortified dollar.

Meanwhile, manufacturing in China showed signs of recovery thanks to stimulus measures. Experts, however, remain cautious, pointing out that domestic demand must rise to mitigate weaker external demand, especially if anticipated U.S. tariff hikes materialize should Trump win the election next week.

(With inputs from agencies.)