Most Emerging Stocks Fall as Investors Await Greek Debt Deal

Most Emerging-market stocks fell ahead of a meeting of European finance ministers trying to clinch a deal on a Greek debt swap and as Spain’s economy contracted.

The MSCI Emerging Markets Index (MXEF) added less than 0.1 percent to 995.80 at 9:41 a.m. in London, with 118 shares retreating and 93 rising. The Micex Index (MICEX) dropped 0.9 percent in Moscow and the ISE National 100 Index slipped 0.2 percent in Istanbul. The PX Index (PX) increased 1.3 percent in Prague as Erste Group Bank AG (EBS) surged as much as 7.8 percent. Markets in Shanghai and Hong Kong were closed for the Chinese New Year holidays.

European Union finance ministers will meet in Brussels later today to discuss new budget rules, a financial firewall to protect indebted states and a Greek debt swap, with EU leaders racing to put together a firm rescue response in the coming weeks. Spain’s economy contracted 0.3 percent in the fourth quarter after stagnating in the previous three months, the Bank of Spain said today. A Chinese purchasing managers’ index signaled manufacturing may contract for a third month.

“Chinese data and Greek debt will weigh on markets,” Chris Weafer, chief strategist at Troika Dialog in Moscow, wrote in e-mailed comments today. “Despite the strong start to the year for equities, especially in emerging markets, sentiment remains very fragile and news flow very conflicted.”

The preliminary January reading of 48.8 for China’s purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics on Jan. 20, compared with a final figure of 48.7 for December. The dividing line between contraction and expansion is 50.

Greek Talks

Bondholders negotiating the Greek swap have made their “maximum” offer, leaving it to the EU and International Monetary Fund to decide whether to accept the deal, said Charles Dallara, who’s representing private creditors in the talks.

Shares in Erste surged in Prague as Goldman Sachs said in a note to clients that the company’s market capitalization has dropped to roughly equal to that of Komercni Banka AS (KOMB), a “valuation abnormality” that underlines its “buy” rating.

The BUX Index (BUX) gained 0.4 percent in Budapest. Hungary may obtain a loan from the International Monetary Fund and the European Union by March or April, Mihaly Varga, Prime Minister Viktor Orban’s chief of staff, told TV2 in an interview today.

The BSE Sensitive Index, or Sensex (SENSEX), rose less than 0.1 percent in Mumbai and the FTSE/JSE Africa All Share Index (JALSH) added 0.1 percent in Johannesburg.

The lira weakened 0.4 percent against the dollar, the rand depreciated 0.3 percent and the ruble slipped 0.2 percent. The ringgit strengthened 0.6 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 414 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

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

To contact the reporter on this story: Jason Webb in London at jwebb25@bloomberg.net.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.