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EMERGING MARKETS-Stocks eye fifth straight weekly loss as AI worries sap risk appetite

By Reuters News

By Ragini Mathur and Sudeshna Ghoshal

Oct 30(Reuters) - Emerging-market stocks fell on Friday and were set for weekly and monthly declines as renewed doubts about the payoff from vast AI spending soured risk appetite.

MSCI's global emerging-market equity index .MSCIEF fell 1.4%, extending the previous session's losses. The gauge was on track for a fifth consecutive weekly decline and a monthly drop of more than 7%, its worst showing since the onset of the US-Israeli war against Iran.

The index, which had risen as much as 28% earlier this year, has since pared some gains and is up about 11% now as a selloff in technology shares has exposed the market's heavy dependence on AI-linked chipmakers in South Korea and Taiwan.

Investors are increasingly questioning whether the sector's huge capital expenditure, much of it debt-funded, will generate sufficient returns.

South Korea's KOSPI .KS11 fell 3.5%, while Taiwan's benchmark .TWII lost 2.5%. Underwhelming results from technology heavyweight such as Samsung 005930.KS this week accelerated the retreat from AI-related trades.

The risk-off mood was compounded by persistently high oil prices and concern that the Middle East conflict could escalate, further disrupting energy supplies and fuelling inflation. O/R

Elsewhere in Asia, Indonesia remained under scrutiny after MSCI proposed removing the country from key indexes over market-access and governance concerns. Indonesian equities .JKSE were headed for their worst monthly performance in 18 years.

In emerging Europe, investors focused on economic data. Czech and Hungarian economic growth slowed, while Hungary's economy was hit by a record drought that weighed on agricultural output. Hungary's benchmark .BUX fell 0.7%, while Czech equities .PX slipped 0.4%.

Polish inflation slowed more than analysts expected in October, helped by a drop in fuel prices, and returned to the upper end of its central bank's target range. Polish stocks .WIG dropped 1.4%.

Regional currencies were little changed against the euro as investors digested the European Central Bank's decision to leave interest rates unchanged.

"There is a confluence of external factors weighing on CEE currencies, yet even amid all of this, they remain quite resilient," said Roman Ziruk, lead FX strategist at Ebury.

"A rate hike in Czechia in November appears quite likely, unlike Poland."

Ziruk added that weaker sentiment toward the European Union, driven largely by France's political and fiscal strains, was adding pressure to central European currencies.

EM fund flows data by JPMorgan reflected a more cautious investor mood. Equity inflows slowed to $1.6 billion from $4.7 billion the previous week, while bond outflows narrowed to $508 million from $731 million.

MSCI's emerging-market currency index .MIEM00000CUS was subdued and on track for both weekly and monthly losses.

Turkey's benchmark .XU100 fell 1.7%, putting it on course for a seventh straight weekly decline and another monthly loss after a sharp September selloff.

The market remains under pressure after MSCI froze certain index changes for Turkish equities. MSCI has warned that it could consider downgrading Turkey from emerging-market status if sufficient progress is not made by June 2027.

Earlier, Turkey's Capital Markets Board imposed tighter rules on holdings of illiquid stocks and portfolio-management companies, triggering forced selling and leaving some funds struggling to meet redemption requests.


HIGHLIGHTS:


** Thailand records current account deficit of $1.6 billion in September

** China trade accord with Switzerland bucks wider trend towards protectionism



For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see CEE/

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