Most Emerging Stocks Slide on Europe Crisis, Taiwan Tax

Most emerging-market stocks fell as weaker demand at a Spanish bond auction renewed concerns Europe won’t contain its debt crisis and on worries Taiwan may impose a capital-gains tax on stock transactions.

Hotai Motor Co. (2207), an automaker, sank 6.9 percent in Taipei after BNP Paribas SA downgraded the stock. STX Pan Ocean Co., South Korea’s biggest bulk carrier, slid 4.3 percent on concern it will post a wider-than-estimated quarterly operating loss. Citic Securities Co. surged 6 percent in Shanghai, leading gains by brokerages, after China said it will raise the amount foreigners can invest in stocks, bonds and bank deposits.

About seven stocks fell for every four that rose on the MSCI Emerging Markets Index, which climbed 0.1 percent to 1,038.03 as of 2:20 p.m. Hong Kong time. The gauge surged 14 percent in the first quarter. Taiwan’s Taiex index slumped 1.6 percent, the most in Asia. The Shanghai Composite Index (SHCOMP) rose 1.4 percent. In Europe, Spain struggled to borrow in financial markets, selling 2.6 billion euros ($3.4 billion) of bonds at an auction yesterday, an amount that was near the bottom of a range set by the Treasury for the sale.

“Europe is not completely out of the woods and the Spanish bond auction is an indication of that,” Katherine Schapiro, a San Francisco-based manager at Sentinel Asset Management Inc., which oversees about $20 billion, said on Bloomberg Television. “After such a strong first quarter, it’s not a surprise to expect some profit-taking. We have a little room here for some downside and frankly, we think that’s healthy.”

Tax Concern

The MSCI Emerging Markets Index (MXEF) has declined 0.4 percent this week and is on course for a third straight week of losses. Still, the measure has climbed 13 percent this year, beating a 9 percent advance in the MSCI World Index (MXWO) of developed nations. The gauge of developing nations is valued at 10.7 times estimated profit, compared with the MSCI World’s multiple of 12.6 times.

Markets in India and Philippines are shut for holidays. Taiwan’s stock index slumped for a third day to its lowest close since Feb. 1. There’s a “99 percent” chance that Taiwan will introduce the tax to address social inequalities and to raise tax revenues, Schive Chi, chairman of Taiwan Stock Exchange Corp., said in an April 3 interview.

“There’s a lot of displeasure among investors,” Eric Chou, who helps manage around $1.8 billion at Jih Sun Securities Investment Trust Co. in Taipei, said in a telephone interview. “There will be more talks this afternoon and there’s still a lot of uncertainty.”

China Rallies

Taiwan’s Hotai Motor fell the most since October 2008, the biggest decliner on the MSCI Emerging Markets gauge. The company’s stock rating was cut to reduce, an equivalent of sell, from hold at BNP Paribas. Inotera Memories Inc. (3474), a chipmaker, plunged 6.5 percent in Taipei.

STX Pan Ocean tumbled to its lowest level since Jan. 19 in Seoul. The company may post a wider-than-expected first-quarter operating loss of 72.7 billion won, Daishin Securities wrote in a report today.

Stocks in China climbed after the nation accelerated the opening of its capital markets as the government shifts its growth model to domestic consumption from exports. The China Securities Regulatory Commission increased quotas for qualified foreign institutional investors to $80 billion from $30 billion.

Offshore investors will also be allowed to pump an extra 50 billion yuan ($7.9 billion) of local currency into the country, up from 20 billion yuan, according to a statement on its website April 3.

Industrial & Commercial Bank of China Ltd., the country’s biggest lender, lost 1.4 percent in Shanghai, while largest rival China Construction Bank Corp. (939) retreated 1.2 percent. Chinese Premier Wen Jiabao said the nation needs to break a banking monopoly of a few big lenders that make easy profits because it’s hard to borrow money elsewhere.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net;

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

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