Emerging Stocks Drop Most in 2 Weeks on China Concerns
Emerging-market stocks tumbled the most in two weeks after Chinese Premier Wen Jiabao said the world’s second-largest economy faces “relatively large” downward pressure.
The MSCI Emerging Markets Index (MXEF) Index lost 1.1 percent to 935.66 by the close in New York, the steepest drop since June 25. Technology companies led the retreat with HTC Corp. (2498), Asia’s second-largest smartphone maker, sliding to a two-year low after profit declined. Power company OAO E. On Russia slumped 2.8 percent in Moscow while OAO Magnit, Russia’s largest food retailer by market value, surged the most in a week. Brazilian markets were closed for a holiday.
China’s Wen said the government will intensify fine-tuning of policies, the state-owned Xinhua News Agency reported yesterday. The nation’s inflation eased to a 29-month low in June, the National Bureau of Statistics said today in Beijing. Spanish 10-year debt yields topped 7 percent. U.S. employers added fewer workers to payrolls than forecast in June, a July 6 report showed.
“The disappointing U.S. jobs data, which is key for consumption, and lower price gains in China all point to slowing growth,” Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion, said by phone today. “It’s inevitable some developing countries that highly depend on exports will feel the pinch.”
The MSCI Emerging Market gauge, which has been declining for four days, is headed for its longest losing streak in a month. The measure has added 2.1 percent in 2012 and trades at a multiple of 10.1 times estimated earnings, compared with 12.2 for the MSCI World Index, according to data compiled by Bloomberg, The index of developed nations has added 3.5 percent this year.
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, fell 0.4 percent to $38.63.
The Chicago Board Options Exchange Emerging Markets ETF (EEM) Volatility Index, a measure of options prices on the fund and expectations of price swings, gained 1.6 percent to 27.32.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 371, according to JPMorgan Chase & Co.’s EMBI Global Index.
Ten-year Spanish yields jumped 11 basis points to 7.06 percent, above the 7 percent threshold that prompted full bailouts of Greece, Ireland and Portugal. France and Germany sold six-month debt at negative yields amid demand for assets considered safe.
Asian Indexes Sink
Russia’s Micex Index was little changed in Moscow. OAO Magnit soared 2.4 percent to lead the advice while OAO E. On Russia dropped the most since June 21.
The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong sank 2.4 percent, the most since June 4, while the Shanghai Composite Index (SHCOMP) also lost 2.4 percent to a six-month low. The Philippine Stock Exchange Index dropped 1.8 percent and the Philippine peso weakened 0.4 percent versus the dollar after the government tightened rules on capital inflows.
Egypt’s EGX 30 Index fell the most in three weeks after President Mohamed Mursi reinstated parliament, reversing the military’s decision.
The index dropped 4.2 percent, the biggest slump since June 19. Mursi’s decree, which also called for a fresh parliamentary vote within 60 days after the approval of a new constitution in a public referendum, came after the military last month dissolved the assembly and assumed legislative authority.
The PX gauge of Prague-listed companies tumbled 0.9 percent as the Czech market reopened after two public holidays.
The BSE India Sensitive Index dropped 0.7 percent, the largest slide since June 18, as lower-than-average monsoon rains threaten the nation’s efforts to tame inflation and spur economic growth.
All industry groups on the MSCI developing-markets index fell today, with industrial stocks the second-biggest decliners.
E Ink Holdings Inc. (8069) sank the most in seven months after the supplier to Amazon.com Inc.’s Kindle slumped 7 percent on June sales that plunged 71 percent from a year earlier.
HTC retreated 5.6 percent in Taipei to its lowest since March 2010 after saying second-quarter net income declined 58 percent from a year earlier to NT$7.4 billion ($247 million). That compares with the NT$7.59 billion average estimate of 13 analysts surveyed by Bloomberg.
A report later this week may show China’s economic growth slowed to 7.7 percent in the second quarter. The People’s Bank of China lowered the benchmark one-year lending rate by 0.31 percentage point on July 5, the second rate cut in a month.
Chinese economists’ forecasts for second-quarter growth are “too optimistic,” Lu Ting, China economist at Bank of America Corp.’s Merrill Lynch unit, said in a Bloomberg Television interview today from Hong Kong. He predicts two more interest- rate cuts by the end of this year and three more reductions in lenders’ reserve-requirement ratios.
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