Emerging Stocks Retreat Most in Three Weeks on Global Growth Concern
Emerging-market stocks fell, with the benchmark index dropping the most in seven weeks, amid concern Europe’s debt crisis and slowing growth in the U.S. and China will dim the outlook for the global economy.
The MSCI Emerging Markets Index decreased 1.8 percent to 1,142.82 at 4:40 p.m. in New York, the largest decline since May 23. The Hang Seng China Enterprises Index retreated 1.7 percent, while India’s Sensex Index slipped 0.7 percent. Russia’s Micex Index (INDEXCF) slid 1.3 percent and Hungary’s equities sank to a six- month low. Brazil’s Bovespa tumbled to the lowest in more than a year and Argentina’s Merval Index lost 2.2 percent.
Energy and consumer shares led losses among 10 industry groups in the MSCI index after oil fell to the lowest level in a week in New York on concern that the European debt crisis will spread to Italy. Chinese inflation rose to the highest level in three years in June while imports grew the least since October 2009. U.S. data on July 8 showed the unemployment rate rose as hiring slowed.
“There seems to a bit of disappointment over the U.S. job- market data as well as China’s still-high inflation figures,” said Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees $29 billion. “Investors may have to endure the lingering uncertainties in the near term.”
The MSCI gauge of developing nations has slid 0.7 percent this year, trailing a 2.7 percent gain in the MSCI World Index, a measure for developed markets. Stocks in the benchmark index for emerging equities are valued at 10.2 times estimated profit for the next 12 months, less than the multiple of 11.8 times for developed countries, according to data compiled by Bloomberg.
Lower Estimates
Emerging-market stocks will probably advance less than previously forecast this year as weaker investor sentiment prevents a “clear valuation premium,” Citigroup Inc. said.
The brokerage cut its end-2011 forecast for the MSCI Emerging Markets Index to 1,400, compared with an earlier estimate of 1,500, Citigroup strategists led by New York-based Geoffrey Dennis wrote in a July 8 report. They reiterated their “bullish” stance on developing-nation shares.
China may report July 13 that gross domestic product rose 9.3 percent from a year before, according to the median estimate in a Bloomberg survey, down from 9.7 percent the previous quarter.
Brazil, Hungary
The Bovespa index fell 2.1 percent, the biggest drop in five months, to the lowest level since May last year. Itau Unibanco Holding SA, Brazil’s largest lender by market value, slumped 3.7 percent to a one-year low, leading the decliners. OGX Petroleo & Gas Participacoes SA and Petroleo Brasileiro SA followed the oil price lower.
Hungary’s BUX index went down by 2.2 percent, the most since April, as OTP Bank Nyrt., the largest lender, and Mol Nyrt., the country’s biggest oil refiner, declined.
The forint weakened 3 percent versus the dollar, the worst performer among major emerging-market currencies, on concern the European Union’s debt crisis may spread.
Samsung Electronics, South Korea’s No. 1 exporter of consumer electronics, fell 2.3 percent. LG Display Co., the world’s second-largest liquid-crystal display maker, dropped 3.7 percent. Taiwan Semiconductor, the world’s largest contract maker of chips, dipped 1.7 percent.
Extra Yield
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose nine basis points, or 0.09 percentage point, to 310, 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 increased 12 basis points to 215, according to data provider CMA in London.
Turkey’s lira fell to the weakest level in more than two years against the dollar as concern about Europe’s debt crisis curbed demand for higher-yielding emerging-market assets. Turkey’s current-account deficit more than doubled to $7.8 billion in May from a year earlier, the central bank said today. The nation’s ISE National 100 equity index lost 1 percent in a second day of declines.
To contact the reporters on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net; Belinda Cao in New York at lcao4@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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