Emerging-Market Stocks Fluctuate on China Consumer Price, Fed Speculation

Emerging-market stocks fluctuated as inflation concern weighed on Chinese consumer shares and commodity prices slipped on speculation monetary easing by the Federal Reserve may fall short of investors’ expectations.

The MSCI Emerging Markets Index fell 0.2 percent to 1,113.33 as of 12:57 p.m. in London, after gaining as much as 0.2 percent in earlier trading today. China’s Shanghai Composite Index declined 0.3 percent from a six-month high after the government increased retail gasoline and diesel prices by 3 percent, potentially contributing to faster growth in consumer prices. South Korea’s Kospi Index rose 0.2 percent. Poland’s WIG20 stock index tumbled 0.7 percent.

Some investors are selling shares and emerging-market currencies in case the Fed makes smaller purchases of government bonds than expected, in a policy known as “quantitative easing” or QE2, “driving direction in emerging-markets and global markets,” said Chris Shiells, an emerging-market strategist at Informa Global Markets in London. “There’s a lot of speculation about QE2, about how much it’s going to be and the timing of it.”

The Russian ruble depreciated 0.4 percent to 30.3698 to the dollar, breaking a three-day series of gains. The Turkish lira weakened 0.4 percent.

Kweichow Moutai Co., China’s biggest producer of baijiu liquor by market value, fell 2.3 percent, snapping a seven-day, 9.2 percent advance. Sichuan New Hope Agribusiness Co., a producer of animal feed, lost 4.3 percent.

China Railway

The Shanghai Composite, which yesterday closed at its highest since April 16, is now valued at 20.3 times earnings, compared with 17 times in early July, according to weekly data compiled by Bloomberg. The 14-day relative strength measure for the Shanghai gauge, measuring how rapidly prices have advanced or dropped during a specified time period, was at 77 today. Readings above 70 indicate a price may be poised to fall.

Hyosung Corp. rose 7.8 percent in Seoul after LIG Investment & Securities Co. predicted the South Korean chemicals and trading company will post a record quarterly profit.

China Railway Construction Corp., the builder of more than half the nation’s railroads, tumbled 14 percent in Hong Kong trading for the steepest decline on the MSCI gauge, after forecasting a loss from a Mecca rail project on cost overruns.

PKO Bank Polski SA, Poland’s biggest lender, was the biggest drag on the country’s stock index, losing 1.5 percent. Copper miner KGHM Polska Miedza SA decreased 1 percent as the metal for three-month delivery slid 0.3 percent on the London Metal Exchange. Oil slipped as much as 0.8 percent and last traded 0.1 percent higher in New York at $82.58 a barrel.

Lower energy and base metal prices weighed on Russia’s Micex stock index, which fell 0.2 percent. OAO Magnitogorsk Iron & Steel Works retreated 1.3 percent.

Investors are concerned the U.S. central bank may ease monetary policy less than expected, Andrew Freris, a senior investment strategist for Asia at BNP Paribas Wealth Management, said in an interview with Linzie Janis and John Dawson on Bloomberg Television’s “On the Move Asia.”

--Chua Kong Ho in Shanghai. Editors: John Kohut,

To contact the reporters on this story: Jason Webb in London at jwebb25@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net.

To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net

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