Emerging market stocks fell into a bear market on Tuesday amid concerns over China, following a move by its Central Bank to devalue the nation’s currency.
The benchmark MSCI Emerging Markets Index has fallen 20 percent since its September 2014 peak, which is the threshold for a bear market.
The benchmark MSCI EM gauge fell 1.1 percent and the iShares MSCI Emerging Markets ETF fell 2.19 percent on Tuesday, which ended a bull rally that started in 2012, according to Bloomberg.
China’s Central Bank, The People’s Bank of China (PBOC), weakened the yuan’s daily reference rate by a record 1.9 percent on Tuesday and says it will strengthen market-oriented reforms in addition to increasing two-way market volatility, allowing depreciation to counter a slump in the nation’s exports.
Following the move by the PBOC, the yuan dropped an unprecedented 1.6 percent and fell to weakest level since Sept 2012.
“There is a great deal of nervousness around emerging markets now that the general economic environment has been less favorable for them,” Alan Gayle, senior strategist at Ridgeworth Investments, told Boomberg. “The fact that China decided to let its currency drift lower will add even more pressure.”