U.S. tech stocks decline, hitting risk sentiment; emerging market assets may face the largest drop in three weeks
The decline in U.S. tech stocks is expected to lead to the largest drop in emerging market assets in three weeks, with the MSCI Emerging Markets Currency Index falling by 0.3% and the Emerging Market Equity Index down by 1.3%. The New Taiwan Dollar and South Korean Won led the decline, with Taiwan Semiconductor being the company with the largest drop. Investors are focused on the Federal Reserve's interest rate direction, anticipating a rate cut in September. The portfolio manager at PineBridge Investments stated that the plunge in tech stocks has impacted market sentiment and may affect emerging market credit
According to Zhitong Finance APP, emerging market stocks and currencies are expected to experience their largest decline in about three weeks, as the sell-off of U.S. tech giants has hit demand for riskier assets. The MSCI Emerging Markets Currency Index fell by as much as 0.3%, while the index reflecting stocks from developing economies dropped by 1.3%. The New Taiwan Dollar and South Korean Won led the decline, while Taiwan Semiconductor (TSM.US) was the largest company by market decline.
PineBridge Investments portfolio manager Anders Faergemann stated, "The sharp drop in tech stocks last night hit market sentiment, contrasting sharply with the positive trend in European markets."
Currently, the direction of the Federal Reserve's interest rates has once again become a focal point, with the minutes from the July Federal Open Market Committee meeting set to be released soon. Investors are also looking forward to remarks from Federal Reserve Chairman Jerome Powell at the Jackson Hole meeting on Friday for clues regarding potential easing policies, while traders expect the Fed to cut rates in September.
Faergemann indicated that he expects the Federal Reserve to cut rates in September, followed by a rate cut every quarter over the next 12 months. He said, "This aligns with our envisioned 'soft landing' scenario. We believe this is beneficial for credit (including emerging market credit), but valuations have shown slight over-expansion."
