Emerging-market stocks fell as the benchmark index posted the biggest drop in eight months amid renewed concern Europe’s debt crisis is worsening and as a Chinese central bank adviser warned of slowing growth.
The MSCI Emerging Markets Index (MXEF) lost 2.6 percent to 912.47 by 5:30 p.m. in New York, the steepest decline since Nov. 23. Brazil’s Bovespa (IBOV) stock index dropped for a second day, pushed lower by beef producer JBS SA and Banco Bradesco SA (BBDC4), the country’s second-biggest bank by market value. China Pacific Insurance (Group) Co. (2601) tumbled by a record in Hong Kong as funds controlled by Carlyle Group LP sought to sell shares in the company.
Spanish borrowing costs surged to a record high on speculation more of the country’s regional governments will follow Valencia in seeking a bailout, increasing concern the debt crisis in Europe is deepening. The 21 countries in the MSCI emerging market index send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show. China’s expansion may cool to 7.4 percent this quarter, said Song Guoqing, an academic member of the People’s Bank of China monetary-policy committee.
“People are moving again to risk-off mode due to the increasing Spain borrowing costs, which is a bad sign for everybody,” said Zoltan Koch at Hamburg-based Warburg Invest, which manages the equivalent of about $14.5 billion of assets. “People are just selling risky assets without thinking of direct effect of Spanish bond yields on emerging market fundamentals.”
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, lost 2.6 percent, the most in a month. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, soared 15 percent, the biggest climb since Nov. 25.
Brazil’s benchmark index fell 2.1 percent as JBS declined 7.2 percent to its lowest level since Nov. 11. Banco Bradesco dropped 4.8 percent, its biggest retreat in almost a year.
Spain’s bonds slumped, sending 10-year yields to a euro-era high. Yields on the securities rose 23 basis points, or 0.23 percentage point, to 7.50 percent after climbing to as much as 7.565 percent, the highest since November 1996.
All 10 industry groups on the MSCI Emerging Markets index dropped today, with financial, materials and energy companies being the biggest drag. The Shanghai Composite Index (SHCOMP) sank 1.3 percent to the lowest close since March 2009. The BSE India Sensitive 30 Index (SENSEX) lost 1.6 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 3.1 percent, the most in two months.
The MSCI developing-nation gauge has lost 0.4 percent this year, compared with a 2.5 percent advance in the MSCI World Index. Shares in the emerging-markets index are trading at 9.9 times estimated earnings, compared with the MSCI World’s multiple of 12.2, according to data compiled by Bloomberg.
Russia’s ruble and the South African rand led currencies lower. The ruble tumbled 1.8 percent against the dollar while the rand fell 2 percent. The yuan slid to its weakest in nine months.
China’s economic growth slowed to 7.6 percent in the three months ended June, the sixth straight deceleration, as Europe’s fiscal crisis sapped exports and a crackdown on property speculation curbed domestic demand. Premier Wen Jiabao said the momentum for a recovery isn’t yet in place, according to a July 15 Xinhua News Agency report, and warned two days later that the labor situation will become more “severe.”
Jiangxi Copper, China Pacific
Jiangxi Copper Co. (358) fell 4.5 percent in Hong Kong, the most since May 16, and China Shenhua Energy Co. dropped 2.5 percent.
China Pacific Insurance tumbled 10 percent as Carlyle Holdings Mauritius Ltd. and Parallel Investors Holdings Ltd. offered 220 million shares in the Chinese insurer for HK$25.50 ($3.29) to HK$26 apiece. The price represents a discount of as much as 5.2 percent to the stock’s closing price on July 20.
Samsung Electronics Co. led exporters lower, falling 2.4 percent in Seoul, while Hyundai Motor Co. (005380), South Korea’s biggest carmaker, slid 1.8 percent. Acer Inc. (2353), the world’s third-largest computer maker, fell 1.5 percent in Taiwan.
Maruti Suzuki India Ltd. (MSIL), the country’s largest carmaker, fell 5.9 percent to a one-month low after saying it’s locking out a factory near New Delhi, pending the conclusion of a probe into a deadly riot last week. Company Chairman R.C. Bhargava on July 21 ruled out an early resumption of the factory, which accounts for about 40 percent of the company’s manufacturing capacity, though he didn’t give an estimate as to how long the stoppage will last.
PTT Exploration & Production Pcl (PTTEP) tumbled 4.8 percent in Bangkok, the most in two months, after saying it plans to raise about 98 billion baht ($3.1 billion) in the nation’s biggest equity offering to fund expansion.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 6 basis points, or 0.06 percentage point, to 358, according to JPMorgan Chase & Co.’s EMBI Global Index.
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