Emerging market stocks fell to their lowest point this year on Tuesday, with major bourses in Asia including those of China and Hong Kong languishing in the aftermath of the collapse of Silicon Valley Bank (SVB), ahead of U.S. inflation data.
The MSCI's index for emerging market equities has fallen over 10% from its January peak, effectively entering correction territory. It was last down 1.7%.
Chinese and Hong Kong stocks fell to their lowest in two months, while South African blue-chips and Turkish equities fell about 0.7% each.
Markets across the globe have been reeling from spillover concerns from not only U.S. tech lender SVB, but also Signature Bank, which collapsed on Sunday.
Emerging market assets initially reacted positively on Monday to U.S. authorities providing emergency funds to U.S. banks, which spurred hopes the Federal Reserve could tone down its aggressive approach to monetary policy tightening and kept the dollar near multi-week lows.
"All of these things that had been positive drivers of emerging markets have all dissipated since," said Jon Harrison, managing director of EM macro strategy at TS Lombard.
But Harrison said the SVB crisis might not be a longer-term negative for emerging market assets - "of course, it may affect how the Fed responds in the immediate term but you still have positive drivers from the U.S. economy."
All eyes are now on U.S. consumer prices data that likely increased by 0.4% last month, after accelerating 0.5% in January amid sticky rental housing costs.
The MSCI's index for EM currencies was muted for the day, while South Africa's rand fell 0.5% following data that showed total mining output fell 1.9% year on year in January.
Hungary's forint slumped to a five-week low before reclaiming some lost ground, while the Czech crown also hit its lowest since early February.
Separately, Sri Lanka approved anti-corruption legislation that is a key clause in the actions needed for its $2.9 billion bailout from the International Monetary Fund (IMF), a government spokesperson said.
Reuters