EMERGING MARKETS-Weak growth, credit rating cuts dog emerging assets; lira at record low
By Sujata Rao
LONDON, Sept 10 (Reuters) - Turkey's lira hit a new low on Thursday, hurt by fresh violence in the east of the country as well as a weak emerging market outlook underscored by lacklustre Chinese data and Brazil's ratings cut to junk.
Emerging stocks fell almost 1 percent, snapping a two-day run of gains after data showed Chinese producer inflation declining for the 42nd month in a row, signalling deflation risks in the world's No. 2 economy. Chinese mainland shares lost more than 1 percent .
A contraction in Japan's key gauge of capital spending also deepened fears of a global contraction, hitting Asian equity, currency and commodity markets.
Emerging economies, already grappling with an investor exodus and slowing growth, now face growing risks of credit rating downgrades, especially after S&P's decision on Wednesday to relegate Brazil to junk for the first time in seven years.
"While it seems clear that other ratings agencies will follow suit on Brazil, it also seems clear that the S&P move will accelerate speculation of downgrades in other countries," said Simon Quijano-Evans, chief EM strategist at Commerzbank.
A London-listed exchange-traded fund dedicated to Brazilian stocks hit a new record low while a Tokyo-listed ETF fell 4 percent .
Brazil will lose its investment grade rating with two agencies by the end of 2016, JPMorgan predicted, warning that would lead to forced selling of hard currency government debt worth $6.2 billion and another $14 billion outflow from corporate bonds.
Quijano-Evans highlighted South Africa and Turkey as junk status candidates, adding that AA-rated China too could start to appear on the ratings radar because of its high debt levels. Continuación...