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Emerging Markets Assets Drop as Local Risks Add to Fed Concern 

October 13, 2016

Srinivasan Sivabalan, Bloomberg

Emerging-market stocks fell to a three-week low and most currencies weakened as increasing domestic risks from Thailand to South Africa worsened sentiment already impaired by a fractious U.S. election campaign and increasing odds of a December Federal Reserve interest-rate move.

Assets in Thailand led declines amid concern about King Bhumibol Adulyadej’s health. Chinese shares traded in Hong Kong retreated the most this month amid speculation that fund flows from the mainland will reduce and the yuan will weaken. Russia’s Micex Index dropped with oil, and the nation’s sovereign bonds declined for a seventh day.

Developing-nation stocks have fallen 2.7 percent and currencies have lost 1.3 percent from 13-month highs reached in the past two months. The rally, which was spurred by investors seeking higher yields, stalled as markets factored in a higher probability of a U.S. interest-rate increase this year and fretted that an election victory for Republican Donald Trump may endanger trade deals.

“There are some specific stories that are sparking losses in individual markets like in Thailand,” said William Jackson, an emerging-market economist at Capital Economics in London. Read more

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