Emerging-market stocks fell the most in a week as the European Commission said the region’s economy will shrink this year, dimming the outlook for exports from developing nations.
The MSCI Emerging Markets Index (MXEF) retreated 0.5 percent to 1,059.26 at the close in New York, the biggest drop since Feb. 16. South Korea’s Kospi Index (KOSPI) fell 1 percent, led by Samsung Electronics Co. (005930), Asia’s biggest exporter of consumer electronics. PGE SA (PGE), Poland’s biggest power producer, tumbled to a three-month low as the government prepared to sell a stake, pushing the country’s benchmark gauge lower. Brazil’s Bovespa Index (IBOV) dropped for a second day, losing 0.4 percent.
The 17-nation euro-region economy, the world’s second largest after the U.S, will contract 0.3 percent in 2012, the European Union’s executive body said today, abandoning a November forecast for 0.5 percent growth. Italy’s economy will shrink 1.3 percent and Spain’s 1 percent, the commission said.
“You’re being hit by a slowdown of demand from the rest of the world, particularly out of Europe, a major customer for many of the emerging markets,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private- banking unit of KeyCorp, said by phone from Cleveland. “Although you’ve alleviated the financial crisis, you haven’t alleviated the economic decline that seems to be unfolding.”
Euro-area finance ministers this week approved a 130 billion-euro ($172 billion) aid package for debt-laden Greece and persuaded investors to provide more relief to the nation. That’s helped alleviate the risk of a Greek default, though Europe’s economy will struggle as countries cut spending to reduce liabilities, McCain said.
The MSCI Emerging Markets Index has gained 16 percent this year, compared to a 9.4 percent advance in the MSCI World Index (MXWO) of developed nations. The developed-country gauge trades for 12.9 times estimated earnings, compared with 10.7 for the emerging-markets index.
The Bovespa declined after a report showing Brazilian consumer prices rose more than analysts predicted this month prompted traders to pare bets that interest rates will continue to be lowered. BR Malls Participacoes SA (BRML3), Brazil’s biggest owner of shopping malls, fell 5.3 percent.
Samsung Electronics paced losses by technology companies on the MSCI Index after a revenue forecast from U.S. computer manufacturer Hewlett-Packard Co. fell short of analysts’ estimates as consumers limit purchases of computers.
Samsung sank 3.1 percent and a gauge of emerging-market technology companies fell 1.5 percent, the most among the 10 industry groups on MSCI’s emerging-markets index. Taiwan Semiconductor Manufacturing Co. (2330) lost 2 percent in Taipei, helping drag the Taiex Index (TWSE) down 0.8 percent.
Stocks retreated for a third day in Istanbul, losing 2 percent as Morgan Stanley cut Turkish shares to “underweight” from “equalweight” in its emerging Europe, Middle East and Africa portfolio.
Warsaw-based PGE slid 4.5 percent to 19.37 zloty, pushing Poland’s benchmark WIG20 Index (WIG20) down 1.3 percent. The government will probably sell 7 percent of PGE to institutional investors today for 19.2 zloty a share, two people familiar with the transaction said, asking not to be identified as the information is yet to be made public.
South Africa’s rand strengthened 1.1 percent against the dollar after Finance Minister Pravin Gordhan said moves to rein in the budget deficit faster than planned will shield the economy and prevent a credit-rating downgrade.
The real weakened 0.4 percent, the first drop in four days, as Brazil’s central bank bought dollars in the forwards market to stem the currency’s three-month rally.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries increased for the first time in five days, rising one basis point, or 0.01 percentage point, to 365 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
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