May 22 (Bloomberg) -- Emerging-market stocks declined for a 10th day, the longest losing streak in almost eight years, as investors fled riskier assets because of sliding commodity prices and rising interest rates.

``We have a lot of speculative excess in every market,'' Marc Faber, a Hong Kong-based money manager who told investors to bail out of U.S. stocks a week before the 1987 Black Monday crash, said in an interview in Zurich. ``A big correction was long overdue.''

The Morgan Stanley Capital International Emerging Markets Index, which tracks shares in 26 developing nations globally, slumped 4.6 percent to 750.01. The measure has tumbled 15 percent from a record close set May 8.

Concern that rate increases will slow world growth and limit demand for raw materials hurt emerging markets, especially Russia, the world's second-largest oil exporter. OAO Lukoil, the country's largest oil producer, tumbled 8.9 percent.

Exchanges in Russia and India halted trading for an hour as prices plunged, and the Micex Stock Exchange in Moscow closed 15 minutes early. India's Sensitive Index fell more than 10 percent before rebounding as the government said banks will help investors meet calls for cash.

The global index's stretch of losses is the longest since a 10-day streak that ended on Aug. 13, 1998, just before Russia devalued the ruble. The benchmark peaked on May 8 at 881.51, more triple its low of 245.64 on Sept. 21, 2001.

Latin American stocks had their biggest decline since the terrorist attacks in the U.S. on Sept. 11, 2001. MSCI's index for the region plunged 6 percent.

Flight to Quality

As emerging market stocks tumbled, U.S. Treasuries and government bonds in Europe and Japan gained, as investors sought the safety of fixed-income securities. U.S. stocks fared better than emerging market shares, as the Dow Jones Industrial Average fell 18.73, or 0.2 percent, 11,125.33.

``When things get uncertain, people tend to expect the worst,'' said Teo Chon Kiat, who helps manage about $1.4 billion in equities at DBS Asset Management in Singapore. ``People just become overly pessimistic.''

In South Korea, which accounts for 18 percent of the MSCI Emerging Markets as its biggest country member, the Kospi index dropped 2.5 percent to a two-month low. Indonesia's Jakarta Composite Index tumbled 6 percent.

Turkey led declines in the MSCI Emerging Europe, Middle East and Africa Index, with the ISE National 100 Index down 8.3 percent. The Russian Trading System Index plunged 9.1 percent and Egypt's CASE 30 Index slid 6.7 percent.

RTS Decline

The decline in the RTS was the biggest since Oct. 30, 2003, when Russia seized Yukos Oil Co. Chief Executive Officer Mikhail Khodorkovsky's stake in the company five days after arresting him.

In Latin America, Brazil's Bovespa dropped 3.3 percent and the Mexican Bolsa slipped 4 percent.

``Foreign investors are pulling back investments, and Brazil is part of it as it was one of the countries with the biggest allocation of foreign investments,'' said Regis Abreu, who manages 1.04 billion reais ($455 million) of stocks and bonds at Rio de Janeiro-based Mercatto Gestao de Recursos. ``The Brazilian stock exchange is one that has most benefited from high commodity prices, so it is natural that it is going to get hit harder.''

Government bonds in developing countries from the Philippines to Turkey and Brazil also fell today.

The yield on the benchmark Turkish lira bond maturing April 2008 jumped 44 basis points, to 15.8 percent. South Africa's 13.5 percent bond due September 2015 yielded 7.76 percent, up 2 basis points from last week and the highest since November.

Brazilian Bond

The yield to the 2015 call date on Brazil's benchmark bond due in 2040, the most traded emerging-market bond, climbed to 7.45 percent and the yield to maturity rose to 8.82 percent from 8.77 percent on May 19, according to JPMorgan Chase & Co. It's the highest yield since November. The price, which moves inversely to the yield, fell 0.70 cent to 123.35 cents on the dollar.

The yield gap between emerging-market dollar-denominated bonds and U.S. Treasuries widened 8 basis points, or 0.08 percentage point, today to 2.16 percentage points, according to JPMorgan Chase & Co.'s EMBI+ index. The spread is 43 basis points above a record low of 1.73 percentage points reached May 1.

Losses in emerging-market currencies including the Thai baht and Philippine peso may spur inflation concerns by making imports more expensive. Ten-year Thai bond yields rose 2.5 basis points today to 5.528 percent, while Philippine three-year note yields soared 113 basis points to 9.07 percent.

Commodity producers' shares declined in the MSCI Emerging Markets index after crude oil reached a six-week low in New York and gold fell for a fourth straight session.

Crude Oil

Crude oil for July delivery rose 67 cents, or 1 percent, to close today at $69.96 a barrel on the New York Mercantile Exchange. Oil reached $75.35 on April 21 and 24, the highest since trading began in 1983.

Shares of financial companies, whose earnings are among the most sensitive to interest-rate changes, declined.

Kookmin Bank, South Korea's largest lender by assets, dropped 5.1 percent to 77,900 won. Turkiye Is Bankasi AS, Turkey's biggest publicly traded lender, plunged 11 percent to 9.30 liras.

China's central bank said it will step up efforts to rein in lending and investment that's increased ``financial risks'' in the economy by creating excess manufacturing capacity. It raised its benchmark one-year lending rate on April 28 for the first time since October 2004.

``People are very scared about interest rates,'' said Jacky Choi, who helps manage $3.5 billion at Value Partners Ltd. in Hong Kong. ``It's likely that economic growth in China will slow because of interest rates.''

Shifting Assets

The comments by the People's Bank of China increased concern that higher interest rates around the world will prompt overseas investors to shift some assets out of emerging markets and into less risky assets, such as U.S. and Japanese government bonds.

On May 10, the U.S. Federal Reserve raised rates for a 16th straight time to 5 percent to curb inflation and signaled it may not be finished with increases. The Fed is scheduled to meet on June 29.

Nine of 16 economists in a Bloomberg News survey last week predicted that Japan's central bank will increase rates, which are at near zero, for the first time in more than five years as early as July.

In India, the Sensex index lost 456.84, or 4.2 percent, to 10,481.77. The measure as much as 1111.70 points and slid below 10,000 for the first time in three months after investors were asked to make additional payments to cover losses.

Shares rebounded from the day's lows after Finance Minister Palaniappan Chidambaram said there's no cash problem in the stock market and banks will give ``ample funds'' to pay for shares.

Cash Available

The Indian government, which controls nine of the country's 10 biggest lenders, said today that money will be available from banks to cover demand that may arise from so-called margin calls.

The Sensex has tumbled 17 percent from an all-time high reached May 10. It is valued at 17 times estimated earnings, more than the 12.9 times for the MSCI Emerging Markets index, according to data compiled by Bloomberg.

``There has been a lot of profit taking in the last two weeks,'' said Alan Richardson, who helps manage $3.5 billion in Asian assets, excluding Japan, at Baring Asset Management in Hong Kong. ``The Indian market is more expensive than other Asian markets.''

Reliance Industries Ltd., which owns the world's third-biggest refinery, dropped 4.6 percent to 931.6 rupees. ICICI Bank Ltd., India's second-biggest lender, slipped 0.7 percent to 553.05 rupees. The two stocks account for almost a fifth of the Sensex's value.

Stock trading was last stopped on May 17, 2004, when a 10 percent market slump was prompted by the defeat of the previous government. The drop reflected concern that the incoming Congress party, backed by the communists, would reverse economic reforms that had spurred the fastest economic growth in 15 years.

To contact the reporter for this story: Michael Tsang in Tokyo at mtsang1@bloomberg.net; Andrew J. Barden in Sao Paulo at barden@bloomberg.net

Last Updated: May 22, 2006 17:28 EDT