Resources fears jolt Brazil

Brazil was among the victims on Monday as the currencies and equities of most emerging markets were jolted after Chinese stocks suffered their worst day in more than 14 months.

The BVSP, or Bovespa stock index, is heavily weighted towards resources such as mining and oil and was hit after China’s Shanghai Composite index fell nearly 7 per cent on persistent fears that authorities would introduce curbs that could dent demand.

“Equities around the globe are under pressure, led by another sharp drop in Chinese stocks, while currencies are playing along and clearly reflect the risk-aversion theme,” said Matthew Strauss, of RBC Capital Markets.

By midday, the Bovespa was down 2.4 per cent to 56,300.31 with Vale, the world’s largest iron ore miner, down 3.4 per cent to R$36.60. The Bovespa is up 54 per cent on the year.

Flow data compiled by UBS last week showed that Brazil got off lightly as investors withdrew funds from emerging markets when concerns mounted that the risk rally had gone too far.

Brazil’s currency – the real – was down 0.6 per cent to R$1.8680, in spite of speculation that the country’s central bank was considering measures to limit its appreciation. The real is one of the best performing currencies this year, with appetite for risk and exposure to rising commodities driving it nearly 20 per cent higher against the dollar.

South Africa’s rand fell 1 per cent to R7.7901 against the dollar while the JSE All-Share Index, also heavily skewed towards re-sources, fell 1.2 per cent to 24,929.42.

In Turkey, the lira fell 0.2 per cent to TL1.5026 versus the dollar while banking stocks undermined the ISE National 100 index, which fell 2.1 per cent to 46,551.19. Turkish stocks have risen by 76 per cent this year. Poland’s zloty fell 0.7 per cent to 2.8658 zlotys while the country’s WIG 20 stock index lost 1 per cent to 2,212.72.