Emerging Stocks Fall Most in Six Months on European Debt Concern
Emerging-market stocks slid the most in six months as concern deepened that Europe’s debt crisis will reduce developing-nation exports and curb demand for riskier assets.
The MSCI Emerging Markets Index (MXEF) fell 2.4 percent to 896.96 by 4:31 p.m. in New York, the biggest drop since Nov. 23. A gauge of materials producers slid to the lowest since September 2009 as metals retreated and Posco (005490), South Korea’s biggest steelmaker, slumped to a seven-month low. Russia’s Micex Index (INDEXCF) tumbled to the lowest since 2010 on declines for power utility companies. Brazil’s Bovespa slipped 0.8 percent as Oi SA fell to the lowest level since 2004.
European leaders are meeting in Brussels today to discuss the region’s debt crisis that has wiped more than $4 trillion from equity markets worldwide this month. The Standard & Poor’s GSCI Spot Index, which tracks 24 raw materials, lost 1.9 percent to the lowest level since Oct. 7. Silver, platinum and palladium declined, along with base metals including copper, zinc and lead, on concern Europe’s debt crisis may hurt global growth and sap demand.
“There are already signs of exports slowing in Asia and Europe,” Neil Shearing, a senior emerging-market analyst at Capital Economics Ltd., said by phone from London today. “Risk appetite is hurt by the possibility of a messy break up of the euro that could lead to a broader financial crisis. Investors go to safe haven assets at the expense of emerging-market assets.”
Russia’s Micex fell 3.4 percent to the lowest level since July 2010 as power utility companies from Federal Grid Co. to OAO RusHydro plunged to three-year lows.
Federal Grid, Russia’s state-run high voltage power transmission company, retreated 9.2 percent to the lowest level since April 2009. OAO RusHydro, the nation’s largest hydropower producer, slipped 8.4 percent.
Brazil’s benchmark gauge fell 0.8 percent in Sao Paulo for a second day of declines. Banco do Brasil SA, Latin America’s largest lender by assets, fell 4.2 percent. Oi SA, the Brazilian telephone company, led declines after the shares fell 5.5 percent to the lowest level since May 2004.
Benchmark indexes in South Korea, Taiwan, Russia and Turkey retreated more than 1 percent.
The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, rose 0.6 percent to 33.75.
China’s economy may have the worst growth in more than two decades if Greece leaves the euro, according to China International Capital Corp., the nation’s biggest investment bank. Expansion in the world’s second-biggest economy would slow to 6.4 percent in 2012 without policy stimulus if an exit drags down global growth by half as much as the 2008-2009 financial crisis did, economists led by Beijing-based Peng Wensheng said in a e-mailed report today.
Jin Liqun, chairman of China Investment Corp.’s supervisory board, said yesterday European authorities have shown a “lack of leadership” on the euro area’s debt crisis and other countries may leave if Greece exits the single currency bloc.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong slipped 1.3 percent to the lowest level since Nov. 30. Jiangxi Copper Co. (358), China’s biggest producer of the metal, dropped 1.8 percent in Hong Kong.
Shanghai Pharmaceuticals Holding Co. (2607), China’s second- largest drug supplier by market value, plunged 24 percent in Hong Kong. The 21st Century Business Herald newspaper said the company is being probed by the Hong Kong Stock Exchange and the China Securities Regulatory Commission for suspected financial fraud involving two acquisitions earlier this year.
Lu Di, an official in the company’s board office, declined to comment when contacted by phone by Bloomberg News.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 7 basis points, or 0.07 percentage point, to 402, according to JPMorgan Chase & Co.’s EMBI Global Index.
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