NEW YORK (Dow Jones) -- Global emerging markets stocks fell sharply Thursday, with Turkey and Brazil posting the steepest declines, as an avalanche of concerns over the U.S. credit and housing markets spilled into other areas, prompting investors to slash their exposure to risky assets.
"What we've seen is a schizophrenic mode in the sense that the subprime and corporate credit markets were affected, but emerging markets were extremely resilient," said Lars Christensen, senior analyst at Denmark's Danske Bank. "But now the concern is not only subprime, but prime as well. There are serious concerns about banks and financial institutions in general."
"An obvious way to reduce risk is reducing exposure to emerging markets," Christensen said.
Fears are growing that troubles in the subprime mortgage market are spreading, with two major bond deals postponed on Wednesday and the reported suspension of redemptions from an Australian hedge fund on Thursday.
Emerging markets assets are "at very expensive levels," Christensen said. " We're beginning to see tighter credit conditions globally and that's affecting emerging markets. The underlying nervousness is quite large."
Stocks in Brazil and Russia, two of the four so-called BRIC heavyweights, tumbled Thursday. Brazil's Bovespa index fell 5.4%, while Russia's RTS index shed 2.5%.
In Turkey, the IMKB-100 index closed down 4.2%. Other emerging European markets were also sharply lower, with benchmarks in the Czech Republic, Poland and Hungary all posting losses.
Led by Brazil, Latin American markets came under heavy selling pressure. Mexico's IPC index declined 5.1%. Chile's IPSA index fell 2.4% and Argentina's Merval index shed 4.3%.
In Asia, most markets posted losses, including those in Indonesia, South Korea, Singapore and Taiwan.
In South Africa, the All Share index slumped 1.8%.
In New York trading, the iShares MSCI Emerging Markets Fund (EEM) fell 6.3% at $131.04.
"This whole subprime/CDO (collateralized debt obligation) crisis is spilling over to other parts of the financial sphere," said Paul Biszko, senior emerging markets analyst at RBC Capital Markets. "LBO [leveraged buyout] financing is being shut down. Private equity deals are not going through. That is being reflected in reduced risk appetite."
"This is abroad emerging markets sell-off," Biszko said. "Everything is down today."
Currencies also weak
Many emerging markets currencies posted losses Thursday, including the Turkish lira, the South African rand, the Hungarian forint, the Brazilian real, and the Mexican peso. Emerging markets CDS spreads are also widening quite significantly, Biszko said. CDS, or credit default swaps, are derivatives that offer the buyer insurance against a company defaulting.
