Emerging Stocks Decline for Third Week on Korea, European Debt Concern

Emerging-market stocks fell, sending the benchmark index to its third weekly drop, on concern China’s bid to tame inflation, tensions between North and South Korea and Europe’s debt crisis will stall the global recovery.

The MSCI Emerging Markets Index slid 1.6 percent to 1,081.06 as of 5 p.m. in New York. The gauge dropped 2.8 percent in the past five days, its third weekly decline and longest losing streak since May.

South Korea’s Kospi Index slid 1.3 percent while the Shanghai Composite Index slipped 0.9 percent, the first decline in three days. Hungary’s Bux Index slumped 2.8 percent after the government moved to effectively nationalize private pension funds, making the gauge the world’s worst-performer today.

Brazil’s Bovespa stock index fell 1.6 percent, capping the biggest weekly decline in almost five months, on signs the central bank will raise interest rates and as concern deepened that the global economy is weakening.

Chinese banks retreated, paced by Industrial & Commercial Bank of China Ltd., amid speculation the government may cut the target for new lending next year. In South Korea, the defense minister quit while the nation prepared for joint military exercises with the U.S. starting Nov. 28 after an artillery attack by North Korea this week. The won weakened 1.9 percent, poised for a third straight weekly decline.

“The same two themes, peripheral Europe and Korea, continue to drive the negative sentiment,” RBC Capital Markets analysts led by Nick Chamie said in an emerging-markets report today, adding that more selling pressure came from “further talk of an imminent Chinese rate hike.”

OTP Bank Nyrt., Hungary’s largest lender, slid as much as 5.6 percent. The forint depreciated 0.9 percent against the euro and 1.8 percent versus the dollar.

Hungary Sell Recommendation

The Hungarian government’s plans to shift private pension- fund assets to the state is causing concern in the European Commission, Bruxinfo news website reported, citing spokesman Amadeu Altafaj.

Hungarian assets should be sold by investors given the “complete unpredictability” of the government, Simon Quijano- Evans, the Vienna-based head of emerging-market strategy at Credit Agricole Cheuvreux SA, said in an e-mailed note.

Concerns Portugal or Spain may join Ireland in seeking a bailout from the European Union and the International Monetary Fund further darkened investor sentiment.

Brazil’s central bank will raise the benchmark rate to 12.25 percent from 10.75 percent by April to contain inflation, Bank of America Corp. said. Bank of America previously forecast policy makers would hold the rate at 10.75 percent through 2011.

Turkey’s ISE National 100 index slid 1.5 percent, down more than 8 percent since its all-time high reached on Nov. 9.

Poland’s WIG20 Index lost 1 percent and Russia’s Micex Index fell 0.3 percent.

The zloty slid 1.4 percent against the euro and 2.3 percent versus the dollar. The rand lost 1.6 percent.

Oil fell as much as 1.3 percent to $82.78 a barrel and copper slid 1.2 percent in London trading. Gold lost as much as 1.8 percent.

Indonesia, India

The difference between the yield investors demand to hold emerging-market bonds and U.S. Treasuries widened 5 basis points to 252, according to the JPMorgan Chase & Co. EMBI+ Index.

Indonesia’s Jakarta Composite Index fell 1.6 percent and The Philippine Stock Exchange Index slumped 1.1 percent. India’s Sensitive Index, or Sensex, sank 0.9 percent.

The Shanghai gauge as of yesterday had retreated 8.3 percent from an almost seven-month high reached on Nov. 8 on concern accelerated monetary tightening will crimp economic growth. The central bank last week ordered banks to set aside larger reserves for the second time in two weeks after raising interest rates in October, the first increase since 2007.

To contact the reporters on this story: Jason Webb in London at jwebb25@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.