* Emerging market sell-off accelerates, hits global stocks
* Wall St seen lower for second day
* Investors fret about Chinese growth, Fed tightening
By Francesco Canepa
LONDON, Jan 24 A global flight from emerging
market assets gathered pace on Friday, sending the Turkish lira
to a record low and setting global shares on course for
their worst week this year.
European shares fell, especially in firms exposed to
emerging markets, and a sell-off on Wall Street was poised to
extend into a second day as investors worried about the impact
of slower growth in China, U.S. monetary policy and political
problems in Turkey, Argentina and Ukraine.
The sell-off raised the prospect of a repeat of moves last
June when developing country stocks fell almost 18 percent and
hit global shares. This came after the U.S. Federal Reserve
signalled its intention to scale back the bond-buying stimulus
that had led investors to chase higher returns in emerging
"We expect the emerging market sell-off 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."
European shares tracked Asian stocks lower. Spain's IBEX
index, highly exposed to Latin America, lagged other
regional bourses, falling nearly 3 percent.
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, sold only 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
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
In the last week, investors withdrew some $2.5 billion from
emerging stocks. Investments in Latin American alone dropped by
$398 million, or 1 percent, analysts said, citing EPFR data.
"I think you've got a bit further to go in terms of outflows
from emerging markets," Mark Tinker, head of AXA Framlington
An MSCI index of emerging market shares was down 1.2
percent, taking its weekly loss to 4.7 percent, its steepest
since early November. The MSCI all-country world equity index
was down 0.5 percent, on course for a weekly
loss of 0.8 percent, its worst since mid-December.
The dollar 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.
"When investors avoid risk, they buy currencies backed by a
current account surplus," said Sho Aoyama, senior market analyst
at Mizuho Securities in Tokyo.
U.S. stock futures suggested a sell-off on Wall Street had
further to go on Friday. March contracts on the S&P 500
were down 0.6 percent.
On Thursday, the Standard & Poor's 500 fell 0.9
percent and the Dow Jones industrial average 1.1 percent
to record its third consecutive day of losses.
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.
Gold traded close its highest in nine weeks and
poised for a fifth straight weekly climb as weaker equities
burnished its safe-haven appeal.