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Banking & Finance

Investors pull out of stocks in emerging Asian markets

SHANGHAI -- Stocks in many emerging markets in Asia declined Monday as the uncertainty created by the Argentine peso's plunge last week spread and concerns grew about the outlooks of these economies as the U.S. scales back its quantitative easing program.

   The fall was particularly steep in countries with large current-account deficits, such as Indonesia and India, as speculative investors targeted those shares. The main stock index in Indonesia dropped 2.6% from the end of last week, while the index in Thailand, which is wracked by political turmoil, fell 2%.

   The Hong Kong Stock Exchange's HS China Enterprises Index slipped below the 10,000 mark for the first time in about five months. Meanwhile, the Shanghai Stock Exchange Composite Index saw only a modest dip because of regulations on money flows to and from the market.

   Stephane Deo, global head of asset allocation at UBS, says the bank is focusing more on Japan, the U.S. and Europe rather than emerging markets where economic conditions are worsening. He has removed some emerging markets from the list of main investment destinations.

   Another factor is the tapering of unorthodox monetary easing in the U.S. With the Federal Reserve reducing asset purchases beginning this month, investors have become concerned about the diminishing money flows into emerging markets.

   If the Fed discusses at its policy-setting meeting this week about an accelerated reduction to bond buying, money may flee emerging markets even faster.

   Another source of concern is the state of the Chinese economy, which is having a hard time recovering as it remains reliant on investment. Shadow banking, through which massive sums are invested or borrowed without going through the proper channel of banks, is also unnerving investors. Some are worried that buyers of a high-yield investment product may not be able to get redemptions at the end of this month as scheduled.

   Amid these mounting concerns, the international price of gold briefly hit a two-month high Monday morning, at $1,279.8 a troy ounce.

   Currencies in emerging Asian markets are falling against the dollar as well. On Monday, the Malaysian ringgit and the Philippine peso each depreciated to their weakest level in three and a half years. The Turkish lira softened temporarily to a record 2.39 or so against the greenback, prompting the country's central bank to hold an emergency policy meeting Tuesday.

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