Emerging markets were already in a pretty bad shape before things went pear-shaped in China. Now there are shares toppling and currencies plunging across the board – its not pretty. With very few exceptions, most of our emerging economies hit by the trauma are unlikely to be emerging from anything, anytime soon.
Vulnerable Russia: A pariah in Europe battered by sanctions and sunken oil prices, Russia wasn’t really doping well to begin with. Now it is worse. The Russian ruble fell near to a 2015 low as it sunk 4.1% against the Euro and 2.3% against the dollar. Meanwhile, the Brent crude – the benchmark for the country’s main export – is now at $43 a barrel. Despite all this woe, President Vladimir Putin’s popularity remains intact, say Reuters. Someone pass the vodka.
Hardy currencies: While Russia falters, Eastern European currencies on the whole have proven to be made of stronger stuff. The Financial Times reports that the dollar had fallen against all of Europe main currencies: down 0.9% against the Bulgarian lev, 0.85% against the Czech Koruna, and 0.65% against the Polish zloty. The Euro membership is not looking so attractive now is it?
Calamitous commodities: Falling China has had a knock effect for those feeding its voracious appetite for commodities. Poor demand for metals has already affected mines in South Africa where they have started laying off workers, the Wall Street Journal says. The currency has also been hit hard with the rand sinking to a record low of 14 to the dollar. This will likely fuel inflation and put pressure on the central bank to raise domestic rates, Reuters reports. All the while the economy struggles as the country’s faces its worst power crisis in seven years.
It’s no fiesta: Bourses around Latin America have posted heavy losses already this week driven by fears of falling Chinese demand for raw materials like soybeans, copper, and iron ore. Brazil’s IBOVESPA index in Sao Paulo closed down 3.03% on Monday, while Argentine and Colombian stocks markets saw declines of 6.3% and 3.52%, respectively. Colombia’s currency was also hit really hard, with the peso down a massive 60%; Brazil’s currency has plunged 36%.
Photo: Waqar Awan