Emerging-Market Stocks Head for Biggest Weekly Decline Since September

Emerging-market stocks fell, driving the benchmark index to its worst week in two months, as Europe’s debt crisis deepened and Chinese bank shares slid after home prices declined in some of its biggest cities.

The MSCI Emerging Markets Index dropped 1.9 percent to 934.08 today. The gauge retreated 3.8 percent this week, the most since the week ended Sept. 23. The Bovespa index retreated 0.5 percent after a report showed Brazil created fewer jobs than forecast in October. South Korea’s Kospi index declined 2 percent and benchmark indexes fell by at least 1 percent in Russia, Poland, Hungary, South Africa and Turkey.

Banks led a 3 percent decline in the Hang Seng China Enterprises Index after new home prices fell last month in some cities including Shanghai and a person with knowledge of the matter said China’s banking regulator warned lenders that some projects backed by local governments may run out of funds. The yield on Spanish 10-year bonds rose as much as 41 basis points to as high as 6.897 percent. German Chancellor Angela Merkel yesterday rejected French calls to deploy the ECB as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil.

“The problem with European politicians and the whole system is there won’t be in the short run any kind of major decision on the European debt crisis,” Daniel Lenz, the chief emerging markets strategist at DZ Bank AG, said by phone from Frankfurt. “Regarding France and Germany, I wouldn’t rule out that this conflict will escalate, especially since France is so fragile. The markets will keep reacting to that.”

Outflows

Emerging-market equity funds posted outflows for the first time in five weeks, as Europe’s debt crisis prompted caution among investors, Citigroup Inc. said.

Funds investing in developing-nation stocks withdrew $183 million in the week ended Nov. 16, Citigroup analyst Markus Rosgen wrote in a report today, citing data compiled by researcher EPFR Global.

The Micex Index fell 1 percent in Russia, the ISE National 100 Index (XU100) slid 1.1 percent in Istanbul and the FTSE/JSE Africa All Share Index retreated 1.9 percent in Johannesburg.

The WIG20 Index lost 2.3 percent in Warsaw and the zloty appreciated 0.5 percent against the euro after Polish Prime Minister Donald Tusk pledged to increase taxes on some commodities, reduce tax incentives and boost pension contributions to reduce the fiscal deficit to about 3 percent of economic output next year.

Chinese Property

Industrial & Commercial Bank of China (1398) Ltd., China’s biggest lender, slumped 3.1 percent in Hong Kong. Agricultural Bank of China Ltd. (1288) fell 2.9 percent.

Chinese home prices fell in 33 of 70 cities monitored by the government in October, the statistics bureau said today. The China Banking Regulatory Commission told lenders last week that loans to property developers are likely to sour as sales slow, said a person with knowledge of the matter.

Brazil’s Bovespa fell, adding to a third weekly drop, after a report showed Latin America’s biggest economy generated 126,143 government-registered jobs, less than the 167,718 expected according to the median estimate in a Bloomberg survey of 12 economists.

Redecard SA, Brazil’s second-biggest card-payment processor, fell 3.2 percent, declining for a third day in Sao Paulo as concern mounted that increasing competition will lead the company to cut its prices. Real-estate company Brookfield Incorporacoes SA (BISA3) retreated 2.9 percent.

Forint Gains

The BUX Index fell 2 percent in Budapest. The International Monetary Fund hasn’t received a request to “initiate negotiations on a Fund-supported program” for Hungary, it said in a statement yesterday.

The Hungarian forint gained 1.9 percent against the dollar. The Korean won and the rupee depreciated 0.8 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 413, according to JPMorgan Chase & Co. (JPM)’s EMBI Global Index.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps rose 9 basis points to 329 basis points, according to data provider CMA.

To contact the reporters on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net

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

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