September 4, 2017 / 9:36 AM / 3 months ago

EMERGING MARKETS-N.Korea nuclear test rattles stocks, currencies

LONDON, Sept 4 (Reuters) - Emerging markets were shaken on Monday by North Korea’s most powerful nuclear test yet, with stocks suffering their steepest loss in more than three weeks while South Korea’s bourse and currency plumbed multi-week lows.

On Sunday, Pyongyang conducted its sixth nuclear test, detonating what it said was an advanced hydrogen bomb for a long-range missile. That prompted the threat of a “massive” military response from the United States if it or its allies were threatened.

Tensions showed little sign of abating as South Korea’s defence ministry said it was seeing signs North Korea planned to stage more ballistic missile launches.

MSCI’s emerging stock index fell 0.7 percent in its steepest daily decline in more than three weeks. The benchmark was dragged lower by falls in heavyweight South Korea which tumbled nearly 2 percent before closing 1.2 percent lower - the weakest close in three weeks.

Hong Kong weakened 0.7 percent, Russian dollar-stocks fell 1 percent and bourses in South Africa and Turkey slipped 0.4 percent.

Currencies also felt the tremors. South Korea’s won took the biggest hit, weakening 1 percent against the greenback. Other currencies also eased against a softer dollar.

“We have seen a typical knee-jerk reaction across global markets,” Phoenix Kalen, strategist at Societe Generale, said, adding investors were trying to assess the possible response of major powers to the test.

“That has resulted in a slight bit of emerging market FX softness, which is reversing some of the gains last week after the soft (U.S.) non-farm payrolls and the signs that the ECB might be becoming a little more cautious (about euro strength).”

Crude oil prices dropping more than 1 percent added to the rouble’s woes, pushing it down 0.7 percent.

China’s yuan proved the exception, advancing 0.2 percent against the dollar to a 15-1/2-month high thanks to a beefed-up central bank fixing and corporate dollar sales.

In Kenya, the shilling traded broadly steady against the dollar after the country’s Supreme Court on Friday unexpectedly annulled August’s presidential election.

Incumbent President Uhuru Kenyatta said at the weekend the country had a problem with its judiciary “and we must fix it” though he also repeated an earlier comment that he would abide by the ruling.

East Africa’s most developed economy saw its shares and dollar bonds plummet and currency weaken on Friday following the court decision.

For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see)

Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 1083.85 -7.51 -0.69 +25.70

Czech Rep 1022.48 +0.51 +0.05 +10.94

Poland 2518.83 -8.79 -0.35 +29.31

Hungary 37493.81 -226.09 -0.60 +17.16

Romania 8067.39 -52.37 -0.64 +13.86

Greece 811.87 -6.79 -0.83 +26.14

Russia 1093.70 -6.88 -0.63 -5.09

South Africa 49834.04 -162.36 -0.32 +13.51

Turkey 10010.49 -412.62 -0.37 +40.79

China 3379.84 +12.72 +0.38 +8.90

India 31673.18 -219.05 -0.69 +18.95

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 26.05 26.03 -0.09 +3.66

Poland 4.25 4.25 +0.05 +3.60

Hungary 305.88 305.55 -0.11 +0.96

Romania 4.59 4.59 +0.02 -1.24

Serbia 119.42 119.00 -0.35 +3.29

Russia 57.86 57.45 -0.71 +5.89

Kazakhstan 338.69 337.99 -0.21 -1.49

Ukraine 25.89 25.76 -0.50 +4.29

South Africa 12.97 12.93 -0.31 +5.89

Kenya 103.05 103.00 -0.05 -0.66

Israel 3.58 3.57 -0.27 +7.55

Turkey 3.44 3.43 -0.26 +2.63

China 6.52 6.56 +0.54 +6.49

India 64.08 64.02 -0.09 +6.03

Brazil 3.14 3.14 -0.03 +3.54

Mexico 17.89 17.81 -0.43 +15.82

Debt Index Strip Spd Chg %Rtn Index

Sov‘gn Debt EMBIG 315 -5 .03 8 03.90 1

All data taken from Reuters at 09:21 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

Reporting by Karin Strohecker, additional reporting by Marc Jones; editing by John Stonestreet

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