Emerging Stocks Fall as China Moves to Curb Credit, Fed Plans Stimulus End
Emerging-market stocks fell for a third day after Federal Reserve officials said its record stimulus will end in June and as traders bet China will take steps to curb credit growth.
The MSCI Emerging Markets Index declined 0.1 percent to 1,202.43, its lowest close in a week. China’s Shanghai Composite Index and India’s Bombay Stock Exchange Sensitive Index both slipped 0.5 percent, while Russia’s Micex lost 1.2 percent. Brazil’s Bovespa declined 1.3 percent.
China Resources Land Ltd., a state-controlled developer, sank 2.1 percent in Hong Kong after the China Securities Journal said the government may raise down-payment requirements for first-home purchases. Brazil’s Vale SA, the world’s biggest iron-ore producer whose top export market is China, slid for the first day in five.
“There are some fears in China about further tightening which had taken what was a decent day in most emerging markets to sort of flattish and in some cases down,” said Greg Lesko, who helps manage about $800 million at Deltec Asset Management in New York. “There was no big change in policy after the Fed conference, the concerns of inflation were not dissipated.”
The Chinese government may require down payments of 50 percent for first-home purchases if property prices continue to rise, the China Securities Journal reported today, citing an unidentified loan official at a domestic bank. The land ministry also will issue policies to control the price of land, it said. The banking regulator also may tighten regulation of loans trust companies extend to developers, according to the report.
China Vanke Co. and Poly Real Estate Group Co., China’s largest developers, slid more than 1 percent.
The Micex declined for a third day after oil and copper prices fell. Steelmakers including OAO Severstal retreated after Bank of America downgraded the stocks to “neutral” from “buy,” saying steel prices have probably peaked for the year.
The Sensex retreated for a third day as Wipro Ltd., India’s third-biggest software services provider, sank 2.9 percent. Reliance Industries slid 1.5 percent after Goldman Sachs removed the company from its Asia “conviction buy” list.
Federal Reserve policy makers said the economy is recovering at a “moderate pace” and a pickup in inflation is likely to be temporary, as they agreed to finish $600 billion of bond purchases on schedule in June.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined 5 basis points to 2.68 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index. South Korea’s won strengthened 0.6 percent against the dollar and the Brazilian real fell 0.3 percent.
Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, led the rally in technology shares after a report yesterday showed U.S. consumer confidence increased more than forecast in April. Taiwan Semiconductor Manufacturing Co. climbed the most in three weeks as Goldman Sachs Group Inc. raised its recommendation.
“It’s positive in that we have more evidence to believe the U.S. consumer demand will recover,” said Lim Chang Gue, a fund manager in Seoul at Samsung Asset Management Co., which oversees about $29 billion. “Still, we need more sustainable signs.”
Taiwan Semiconductor climbed 2.8 percent. The chipmaker’s stock rating was boosted to “buy” from “neutral” at Goldman Sachs, which cited share valuations and the growth outlook.
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