Shares in Emerging Markets Fall Ahead of the Holiday Season

Shares in emerging markets plummeted from a record breaking 18-month highs on Thursday. The drop was precipitated by investors pulling out some profits ahead of Christmas. Meanwhile, Kuwait has been upgraded to EM status by the MSCI.

The emerging markets (EM) index dropped by 0.3%. It was a disappointing slip as the index has been steadily gaining in the last six consecutive sessions. The advance was credited to the improved sentiment of world shares after the US and China agreed to a partial trade agreement.

However, analysts say there’s no incentive for world shares to keep advancing as there have been minimal updates regarding the trade deal.

Jakob Christensen, the EM Research Head of Danske Bank, explained that it was tactically the proper time to get the profits now and wait for further news about the trade agreement.

There’s also a new emerging markets member. The MSCI recently declared that Kuwait’s status has been upgraded to emerging markets on the index. According to one asset management company, the change will create new interest in the country’s ETF and local equities. Local stocks will have passive inflows coming in, particularly as they’ll be included in the Emerging Markets Index next year.

Kuwait’s stock exchange claims these inflows are estimated to generate around $2.6 to $3 billion in investments.

The United Arab Emirates and Qatar experienced the same thing in 2019 and 2013 respectively, with markets showing positive changes after their inclusion to the EM list was announced.

World shares also slipped after hitting record highs this week. Equities in Europe remained as is, with the pound recovering from a 3% decline as fears of a no-deal Brexit resurfaced. The STOXX 600 fluctuated throughout the day while the FTSE eked out a 0.15% increase before a scheduled Bank of England meeting.

Meanwhile, the S&P barely moved today after experiencing record highs for five consecutive days. Stocks in Asia were also sluggish as trading in the region begins to settle down as the year ends.

The Nikkei closed the day 0.3% lower while stocks in China also dropped despite the prevailing optimism on trade. The Australian stock market also ended Thursday with a 0.3% decline.

News about the US House of Representatives voting to impeach President Donald Trump didn’t have much of an impact on the stock market. Investors are likely thinking that the controversial president won’t be convicted as Republicans control the Senate.