* Argentina, Turkey see currencies slump
* EM equities on track for worst week since November
* Wall St falls for second day
* Investors fret about Chinese growth, Fed tightening
By David Gaffen and Francesco Canepa
NEW YORK/LONDON, Jan 24 A full-scale flight from
emerging market assets accelerated on Friday, setting global
shares on course for their worst week this year and driving
investors to safe-haven assets including U.S. Treasuries, the
yen, and gold.
Wall Street opened lower, extending selling to a second day.
Concerns about slower growth in China, reduced support from U.S.
monetary policy and political problems in Turkey, Argentina and
Ukraine drove the selling.
The Turkish lira hit a record low. Argentina's peso fell
again after the central bank abandoned its support of the
The declines mirror moves from last June when developing
country stocks fell almost 18 percent over about two months and
hit global shares.
The broad nature of this selloff combines country-specific
problems with the reality that reduced U.S. Federal Reserve bond
buying reduces liquidity that has in the past boosted
higher-yielding emerging markets assets.
"We expect the emerging market selloff to get worse before
it starts getting better," said Lorne Baring, managing director
of B Capital Wealth Management in Geneva.
"There's definitely contagion spreading and it's crossing
over from emerging to developed in terms of sentiment."
Activity was heavy in exchange-traded funds focused on
emerging markets. The iShares Morgan Stanley EM ETF was
the second-most active ETF in New York trading, trailing only
the S&P 500's tracking ETF.
An MSCI index of emerging market shares was down
1.4 percent. Since mid-October, the index has lost more than 9
percent. The MSCI all-country world equity index
was down 1 percent.
Funds have continued to flee the sector. In the week ended
Jan 22, data from Thomson Reuters Lipper service showed outflows
from U.S.-domiciled emerging market equity funds of $422.41
million, the sixth week of outflows out of the last seven.
Emerging market debt funds saw the 32nd week of outflows out
of the last 35, with $200 million in net redemptions from the
250 funds tracked by Lipper.
"I think you've got a bit further to go in terms of outflows
from emerging markets," said Mark Tinker, head of AXA
The Turkish lira hit a new record low of 2.33 to the
dollar, even after the central bank spent at least $2 billion
trying to prop it up on Thursday.
Turkey's new dollar bond, first sold on Wednesday, fell
below its launch price. The cost of insuring against a Turkish
default rose to an 18-month high and Ukraine's debt insurance
costs hit their highest since Kiev agreed a rescue deal with
Russia in December.
Argentina decided to loosen strict foreign exchange controls
a day after the peso suffered its steepest daily
decline since the country's 2002 financial crisis
. On Friday, it was down 2.8 percent.
On Wall Street, the S&P 500 lost 12.72 points or 0.7
percent, to 1,815.29.
European shares were down, especially in firms exposed to
emerging markets, tracking Asian stocks lower. Spain's IBEX
index, highly exposed to Latin America, lagged other
regional bourses, falling 2.9 percent.
The dollar index edged lower after losing 0.9 percent
against a basket of major currencies, including the euro, yen,
Swiss franc and sterling, on Thursday. That was its worst
one-day performance in three months.
A flight to safety lifted currencies backed by a current
account surplus, such as the Japanese yen and Swiss franc, and
highly-rated government bonds. German Bund futures rose and
10-year U.S. Treasury yields hit an eight-week low
below 2.75 percent.
Gold traded close to its highest level in nine weeks
and was poised for a fifth straight weekly climb as weaker
equities burnished its safe-haven appeal. Spot gold rose to
$1266.90, up from $1263.95.