* MSCI EM stocks drop 3.7%, FX up 0.03%
* KOSPI heading for biggest monthly drop since 1997
* S&P flags Indonesia policy uncertainty after cenbank
governor resignation
By Utkarsh Hathi
July 28 (Reuters) - Emerging market stocks slid to a more
than three-month low on Tuesday as a rout in Asian chipmakers
revived concerns over valuations of AI-related stocks, while
currencies were mixed against a steady dollar.
Asian semiconductor stocks tumbled as a threat of increasing
competition from Chinese chipmakers and uncertainty on returns
from lofty AI capex spending rattled investors.
MSCI's emerging markets equities index fell 3.7%
to its lowest level since April, with losses concentrated in
Asia.
South Korea's KOSPI tumbled 10.8%, heading for its
steepest monthly drop since the Asian financial crisis in 1997,
while Taiwan's tech-heavy benchmark fell 4.7% and
Chinese equities slid 2.8%. The selloff comes ahead of
earnings from tech giants in the U.S. such as Apple ( AAPL ),
Microsoft ( MSFT ), Meta Platforms ( META ), and Amazon ( AMZN )
later this week.
"The trend right now is going to be rather a further
readjustment of the valuations rather than a quick rebound,"
said Ipek Ozkardeskaya, senior analyst at Swissquote.
"What's new is that their free cash flow levels are drying
up faster than investors thought and we saw that last week with
Alphabet".
Conversely, equities in emerging Europe gained, with Polish
, Hungarian, and Romanian benchmarks up
between 0.6% and 0.7%.
The MSCI gauge for emerging market currencies
was muted against the U.S. dollar.
Investors are also looking at the U.S. Federal Reserve's
policy meeting starting later in the day, with greater emphasis
on signs of any hawkishness in the communication on Wednesday as
the U.S.-Iran conflict hangs in the balance.
Oil prices extended declines after President Donald Trump
said on Monday that Washington was having "good talks" with
Tehran.
Most Asian currencies were subdued against the U.S. dollar,
with the Indonesian rupiah slipping 0.3%, after a similar
sized move in the previous session, following the surprise
resignation of the Southeast Asian nation's central bank
governor.
Rating agency S&P said the resignation may contribute to
greater uncertainty about Indonesia's monetary policy, while
affirming its credit rating to 'BBB/A-2'.
Elsewhere, S&P also affirmed Sri Lanka's FX rating at
"CCC+/C" with a "stable" outlook on Monday.
In emerging Europe, currencies traded lower against the
euro, with the Hungarian forint slipping the most,
down 0.7%. The currency has been the region's best performer
this year.
South Africa's rand and the Turkish lira
were muted.
HIGHLIGHTS:
** China starts production of home-grown immersion DUV
chipmaking tools - source
** IMF completes final review of Ghana lending program, unlocks
$371 million
** South African leading business cycle indicator down 0.3% in
May
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