Economies in East Asia are expected to grow at a slower pace than previously forecast. The World Bank has cut growth forecasts in this region of the globe for 2012 as the eurozone crisis continues to pick up steam. Shares and exchange traded funds tracking this region are slumping on the news.
"Weaker demand for East Asia's exports is slowing the regional economy," Pamela Cox, World Bank east Asia and Pacific regional vice president, said in a statement Monday. "But compared to other parts of the world, it's still growing strongly, and thriving domestic demand will enable the region's economy to bounce back to 7.6 % next year."
The Asian Development Bank is expecting emerging Asia to expand about 6.1% this year, and 6.7% in 2013, reports Bettina Wassener forThe New York Times. This includes a larger grouping of countries than those included in the World Bank's estimates.
Overall, countries such as China and Singapore will be experiencing stronger domestic demand which will take over and compensate for external demand. Stimulus measures that were announced by governments in the region are expected to bolster growth into 2013.
Most major central banks in Asia have sought to prop up growth by lowering interest rates; some, including the Chinese central bank, have also lowered the reserves that banks need to hold against deposits, which frees up more cash for them to lend.
The iShares MSCI Emerging Markets Index (NYSEARCA:EEM) is down 0.96% on the latest news and downgrade. Also, the iShares FTSE China 25 Index (NYSEARCA:FXI) shed 1.07%, the largest ETF with pure exposure to China, reports Trang Ho for Investor's Business Daily.
"Emerging-market stocks have had such a nice rally over the past couple of months that traders will use any excuse to take profits," Matthew Tuttle, CEO of Tuttle Wealth Management said.
iShares MSCI Emerging Markets Index
Tisha Guerrero contributed to this article.
Disclosure: I am long EEM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.