Emerging-Market Stocks Drop for Second Day as Banks Slide, Crude Oil Falls

Emerging-market stocks declined for a second day as banks dropped amid concern loan growth will slow and as falling oil prices dragged down energy producers.

The MSCI Emerging Markets Index retreated 0.5 percent to 1,115.17 at 8:13 a.m. in New York. Indonesia’s Jakarta Composite Index sank the most among 21 major emerging markets, falling 2.4 percent. Russia’s ruble weakened 0.2 percent against the dollar, the first drop in four days.

Indonesian bank shares including PT Bank Rakyat Indonesia sank as a central bank deputy governor said loan growth will probably hit the lower end of its 2010 target. Bank of China Ltd. sank in Hong Kong trading as the Oriental Morning Post said regulators in Shanghai ordered halts on lending to companies for purchases of fixed assets. Policy makers are under pressure to slow lending after inflation in Indonesia and China topped economists’ estimates last month.

“Inflation is going to remain as the dominant theme for the first half of the year” in 2011, Peter Redward, head of emerging-Asia research at Barclays Plc in Singapore, said in a Bloomberg Television interview.

The MSCI emerging-market index has retreated 3.5 percent from its 2010 high on Nov. 5 amid growing concern that countries from China to Brazil will tighten monetary policy as inflation accelerates. Financial companies have led the slump, with the MSCI Emerging Markets Financials Index losing 8.6 percent during the period.

The Jakarta Composite index declined the most since Nov. 30 today and Bank Rakyat, the nation’s second-biggest lender by assets, retreated 3.7 percent.

Norilsk Nickel

Bank lending may increase “near” 22 percent this year, the low end of Bank Indonesia’s 22 percent to 24 percent target, Deputy Governor Muliaman Hadad said yesterday. Indonesia’s consumer prices rose 6.33 percent last month from a year earlier.

Bank of China shares declined 1 percent and China Construction Bank Corp. lost 0.7 percent. The China Banking Regulatory Commission’s Shanghai branch ordered halts on lending to companies for the purchases of fixed assets until the end of the year, the Oriental Morning Post reported.

China is likely to set a target of at least 7 trillion yuan of new loans for 2011, two people briefed on the matter said this week. While a quota of more than 7 trillion yuan would be less than the previous two years, it would exceed estimates made by UBS AG and Bank of America Corp. in the past month.

Russia’s Micex Index of shares retreated 0.2 percent. Oil declined 0.5 percent in New York trading while copper sank 1.5 percent in London.

OAO GMK Norilsk Nickel shares slipped 0.4 percent. United Co. Rusal, holder of a 25 percent stake in Norilsk Nickel, snubbed a $12 billion offer from the mining company to buy back the shares, rejecting a second proposal in two months to sell out.

To contact the reporters on this story: Ian C. Sayson in Manila at isayson@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net.

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

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