Emerging-Market Stocks Fall, Erasing 2011 Gain, on Global Growth Concern

Emerging-market stocks declined, erasing the benchmark index’s 2011 gain, as concern deepened that the global economic expansion is slowing.

The MSCI Emerging Markets Index slid 1.6 percent to 1,147.58 at 4:30 p.m. in New York, leaving it 0.3 percent lower for the year. South Korea’s Kospi Index (KOSPI) sank 2 percent, the biggest loss since March 15, while the won weakened 0.9 percent against the dollar. Brazil’s Bovespa index erased earlier losses and climbed 0.4 percent after companies reported earnings growth. Mexico’s IPC index fell 0.6 percent.

Global investors have tempered their optimism about the world economy and plan to put more of their money in cash and less in commodities over the next six months, a Bloomberg survey found. China said it will raise banks’ reserve requirements by 0.5 percentage point in a bid to curb lending and tame inflation, while a report showed European industrial production unexpectedly declined in March.

“China is facing more interest-rate adjustments and that could cascade to other markets,” said Jonathan Ravelas, chief market strategist at Banco de Oro Unibank Inc. in Manila. “Commodity prices can’t be sustained at elevated levels because it’s not backed by the global economic outlook.”

Malaysia’s ringgit tumbled 1 percent after commodities fell earlier in the day. Russia’s Micex Index retreated 1.5 percent while the ruble weakened 0.5 percent.

The MSCI index erased an advance this year that had sent the gauge up as much as 4.8 percent earlier this month. Today, 561 stocks on the index declined as 221 rose. The 21-country measure is valued at 11 times analysts’ 12-month earnings estimates, down from 12 times at the beginning of the year, according to data compiled by Bloomberg.

Yield Spreads

The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed eight basis points, or 0.08 percentage point, to 297 today, according to JPMorgan Chase & Co.’s EMBI Global Index. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa rose 1 basis point to 189, according to data provider CMA in London.

Petroleo Brasileiro SA slid 0.7 percent after it said its fuel distribution unit will cut gasoline prices by 6 percent as the government battles to slow inflation. Petrochemical producer Braskem SA rose 4 percent after the company said first-quarter net-income increased 13-fold.

Chinese Stocks

The Shanghai Composite lost 1.4 percent before the announcement on banks’ reserve requirements. Consumer prices increased 5.3 percent in April, the statistics bureau reported yesterday, exceeding the 5.2 percent median forecast of economists surveyed by Bloomberg and topping the government’s full-year target of 4 percent for a fourth straight month.

Jiangxi Copper Co., China’s largest producer of the metal, tumbled 3.5 percent while Korea Zinc Co. slid 5.7 percent in Seoul. OAO Gazprom, Russia’s gas-export monopoly, retreated 3.1 percent in Moscow.

Forty percent of those surveyed in the Bloomberg Global poll expect oil prices to fall in the next six months, the first time respondents felt that way since the inception of this poll in July 2009. Fewer than four in 10 of those surveyed described the U.S. and global economies as improving, down from about 50 percent who felt that way back in January. Brazil and China trailed the U.S. when survey participants were asked to name the best countries for investment.

Hyundai Motor Co. (005380), South Korea’s biggest carmaker, fell 4.7 percent after its partner Beijing Automotive Industry Holding Co. said auto sales in China may continue to grow slowly through the second quarter before rebounding in the second half.

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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