Jan 30 (Reuters) – Emerging market stocks fell on Monday, as Indian shares dipped after Adani group companies extended losses and Hong Kong stocks retreated, while Nigerian government bonds dropped after a Moody’s ratings downgrade for the West African nation.
The MSCI’s index for emerging market stocks .MSCIEF fell 0.6% at 1024 GMT.
In India, most Adani group shares extended their sharp drop as the conglomerate’s rebuttal of a U.S. short-seller’s criticism failed to pacify investors, driving stock market losses for the companies to $70 billion over three days.
Meanwhile, Hong Kong’s Hang Seng index .HSI ended 2.7% lower, after two days of sharp gains.
Chinese stocks .SSEC closed higher, as markets resumed trading after a week-long Lunar New Year break, while Taiwan shares .TWII hit their highest since late June.
Emerging market stocks have rallied nearly 9% since the start of this year, outperforming their currency counterparts.
“We saw the emerging markets rally over the past month and the scandal in Adani raises the question that were these valuations a bit exaggerated or not,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“We could see a bit of a contagion in EM stocks but I don’t think it will be a game changer.”
Emerging market currencies .MIEM00000CUS gained slightly, rising 0.3%.
In central and eastern Europe, the Hungarian forint EURHUF= slid 0.3% against the euro after credit ratings agency S&P cut Hungary’s long- and short-term foreign and local currency ratings to ‘BBB-/A-3’ from ‘BBB/A-2’ on Friday.
Israel’s shekel ILS= fell nearly 1% on jitters over planned judiciary changes by the country’s new hard-right government and fears of escalating conflict with Palestine.
The Pakistani rupee PKR=PK hit a record low, extending its sharp fall since an artificial cap on the currency was lifted last week to move it to a market-based exchange rate.
Elsewhere, Nigeria’s sovereign dollar-denominated bonds fell heavily after ratings agency Moody’s downgraded the West African oil producer late on Friday to Caa1 from B3, citing the government’s deteriorating fiscal and debt position.
Moody’s also downgraded Tunisia’s ratings to CAA2 with a negative outlook, adding that it reflects the view that probability of default may rise beyond what is consistent with the rating.
For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX
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(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Rashmi Aich)