Emerging Stocks Swing Between Gains, Losses on U.S. Home Sales

Emerging-market stocks swung between gains and losses as an advance in commodity prices countered concerns an unexpected drop in U.S. home sales indicates weakening demand in the world’s biggest economy.

The MSCI Emerging Markets Index (MXEF) fell 0.1 percent to 1,014.41 at 2:32 p.m. Jakarta time after rising as much as 0.1 percent. The gauge is set for a 1.9 percent weekly gain, heading for its best start to a year since 2001. South Korea’s Kospi Index (KOSPI) rose 0.4 percent and the BSE India Sensitive Index (SENSEX) gained 0.6 percent. Markets in China, Taiwan and Vietnam are closed for public holidays.

A gauge of six metals traded on the London Metal Exchange rose for a fourth straight day. Sales of new U.S. homes fell in December for the first time in four months, underscoring the Federal Reserve’s view that the housing market is holding back economic expansion. Hyundai Motor Co. (005380) lost 3.5 percent in Seoul trading after Asia’s third-biggest automaker by market value reported fourth-quarter profits that missed analyst estimates.

“Emerging markets are undergoing a slight correction after rising over the past few weeks,” said Finny Fauzana, who helps manage $67 million in assets at PT PNM Investment Management in Jakarta. “U.S. home-sales figure didn’t meet expectations and that’s affecting sentiment on those emerging markets that depend on exports to the U.S.”

U.S. Homes

U.S. purchases of single-family properties decreased 2.2 percent to a 307,000 annual pace, figures from the Commerce Department showed yesterday. The median forecast in a Bloomberg News survey of economists was 321,000. Last year was the worst for the industry in records going back to 1963.

The MSCI emerging market index has risen 11 percent this year. That compares with a 5.3 percent gain in the MSCI World Index (MXWO) of developed markets. Shares on the emerging-market index are trading at 10.2 times estimated earnings, cheaper than the 12.2 multiple of developed nation equities.

The London Metals Index, which tracks metals such as copper, lead and nickel, rose 2.4 percent, the highest since Sept. 16. Sterlite Industries (India) Ltd., India’s largest copper and zinc producer, led a rally among peers in Mumbai trading, gaining 3.3 percent. In Jakarta, PT Vale Indonesia (INCO), the nation’s biggest nickel producer, increased 5.3 percent after the price of the metal rose to a four-month high in London yesterday.

Automaker Earnings

Hyundai Motor lost 3.5 percent and affiliate Kia Motors Corp. (000270) dropped 2.8 percent. Hyundai, maker of the Elantra sedan, yesterday reported net income that was about 10 percent less than the average of analyst estimates compiled by Bloomberg, while Optima-maker Kia’s profit was 27 percent lower than the average forecast.

Hong Kong-based developer Cheung Kong (Holdings) Ltd., which depends on the Chinese mainland for a third of its sales, fell 2.4 percent. China’s property prices need to decline 30 percent to reach a “reasonable” level, according to He Keng, a deputy director of the Financial and Economic Affairs Committee of the National People’s Congress.

Indian stocks gained as the rupee, the worst-performing Asian currency last year, headed for its biggest monthly advance on record after policy makers increased the ceiling on purchases of the nation’s debt by global funds. A stronger rupee will help the central bank control inflation in a country that buys 80 percent of its fuel from overseas.

Reliance Industries Ltd. (RIL), the nation’s most-valuable company, climbed 2.5 percent to its highest level since Dec. 2. Ranbaxy Laboratories Ltd. (RBXY), India’s biggest drugmaker, fell 5.7 percent, the most since May 5, because of costs of a proposed settlement with U.S. authorities over manufacturing violations. Ranbaxy may forgo at least $200 million in sales as a result of the settlement, Kotak Securities Ltd. said.

In Kuala Lumpur, IJM Corp. (IJM) gained 5.1 percent after getting one of the first major construction contracts on a 48 billion- ringgit ($16 billion) mass-rail network planned for Malaysia’s capital.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

To contact the editor responsible for this story: Richard Frost at rfrost4@bloomberg.net

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