Investors sold shares in anticipation of Trump’s tariff announcement, which is expected on Wednesday, driving an MSCI gauge of developing-nation equities down 1.7% — the lowest intraday level since March 13.
Taiwan stocks weighed on the index, with the Taiex closing down 4.2%, which is in correction territory after a 10% drop from its recent high.
Nenad Dinic, EM Equity Strategist at Bank Julius Baer, said that when Trump announces his tariffs, the “slightly bullish outcome” would “involve moderate tariff levels that align with market expectations, consistent with the relatively benign impact on EM assets over the past quarter.”
“A more bearish scenario could arise if tariffs are delayed again — since it prolongs uncertainty and makes it hard to price in — or if tariffs are imposed at higher than expected rates, which should trigger downside pressure and earnings downgrades,” he added.
Meanwhile, foreign currencies in developing nations traded mixed on Monday. The Brazilian real advanced the most among its peers ahead of the official fixing of the currency for March’s last trade. The central bank is also starting the monthly swaps rollover. The Mexican peso was down around 0.5% ahead of the tariff deadline in the US, which Trump has called “Liberation Day,” making it the worst performing emerging market currency.
“Ahead of ‘Liberation Day’ all markets, including EM FX, should be cautious,” said Juan G Perez, a foreigner exchange trader at Monex Inc. “It is truly difficult to foresee the impact without details on what exactly will be affected most and perhaps more importantly for Latin America flows, which region.” Investors are also keeping an eye on the economic data that will be released throughout the week, including the US jobs report on Friday.
Even amid concerns about the global outlook, emerging- markets are set to finish the first quarter of 2025 with gains. The MSCI Emerging Market Currency Index has risen 1.7% in the first three months of the year and the stock gauge is up 2.6% on anticipation that dollar weakness and a slowing US economy will lead investors to shift away from US assets.
In the sovereign debt markets, Ukraine’s dollar bonds plunged to the lowest level in four months after Trump criticized Russian president Vladimir Putin, lowering expectations for a quick ceasefire agreement.
In Mozambique, dollar bonds slid for a fourth straight day, driven by a move by Moody’s Ratings to cut its assessment of the southeast African nation’s local currency debt, warning of a “severe liquidity” crunch.
Argentine dollar bonds fell more than 2.4% on Monday, as investors await some definition and signals about a new exchange program that is expected after an upcoming deal with the International Monetary Fund.
