EMERGING MARKETS-Stocks track worst week in 3 months as recession fears mount

By Shreyashi Sanyal

June 17 (Reuters) – Emerging market stocks were set to end Friday with their biggest weekly declines in more than three months on mounting fears of a global recession as central banks across the world aggressively tighten monetary policy to combat rising inflation.

The MSCI’s index for EM equities .MSCIEF fell 0.2%, down 4.6% for the week, its worst performance since March. Emerging market assets have taken a hit from developed world central banks hiking their policy rates, with the U.S. Federal Reserve delivering its largest rate hike in more than a quarter of a century.

This set off worries of tipping the world’s largest economy into a recession, and when combined with renewed COVID lockdowns in China starting to impact its economy the hike sparked a flight out of riskier emerging market assets, as investors turn towards safer bets and become more defensive.

“The more aggressive line by central banks adds to headwinds for both economic growth and equities. The risks of a recession are rising, while achieving a soft landing for the U.S. economy appears increasingly challenging,” Mark Haefele, global wealth management chief investment officer at UBS.

“The expected fall in inflation has been delayed by the surge in energy and food prices resulting from the war in Ukraine, while disruptions arising from the pandemic are also lingering longer than forecast.”

Turkish stocks .XU100 fell nearly 2% for the week, while South African equities .JTOPI dropped 2.3%, both bourses were set for their second weekly fall.

Emerging market currencies struggled to make headway for much of the week, with the MSCI’s index .MIEM00000CUS posting weekly declines of 0.5%. The index is headed for its second week lower.

Turkey’s lira TRY= shed 0.2% and was on track to record its ninth straight weekly decline – worst losing streak since a currency crisis in December 2021, which was triggered by unorthodox monetary policy amid sky-high inflation.

The Russian rouble RUBUTSTN=MCX opened lower against the dollar, while South Africa’s rand ZAR= firmed to 15.91 against the greenback.

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

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Shreyashi Sanyal in Bengaluru, Editing by William Maclean)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))