Emerging-Market Stocks Retreat for Third Day on Growth Concerns
Emerging-market stocks dropped for a third day, sending the benchmark index to its lowest in more than three weeks, as concern deepened that the global economic slowdown will curb corporate earnings.
The MSCI Emerging Markets Index (MXEF) fell 0.2 percent to 958.78 as of 10:40 a.m. in London, poised for its longest losing streak in a month and the lowest close since Aug. 3. China Southern Airlines Co. sank to a six-week low as profit trailed analysts’ estimates. TPK Holding Co. (3673) and Chimei Innolux Corp. (3481) slumped at least 5.9 percent in Taipei after the consumer-electronics companies announced plans to raise capital. AngloGold Ashanti Ltd. retreated 2.6 percent, leading a gauge of raw-materials stocks to the lowest in a month.
Exporters led the MSCI index’s decline after Japan’s government downgraded its assessment of the economy for the first time in 10 months, citing risks from a further slowdown in global growth. The world economic situation is “severe” and “complicated,” Wang Chao, China’s vice commerce minister, said at a forum in Beijing today.
“Growth in emerging markets is going to continue to be disappointing,” Alain Bokobza, the head of global asset- allocation strategy at Societe Generale SA in Paris, said in an interview on Bloomberg Television.
MSCI Inc.’s indexes of developing-nation raw-materials, industrial and technology companies sank at least 0.4 percent. The Hang Seng China Enterprises Index slipped 0.2 percent. The BSE India Sensitive Index dropped 0.3 percent on concern the political standoff between the ruling Congress Party and the main opposition will delay economic reforms.
Russia’s Micex Index advanced 0.4 percent as oil rallied in New York. Turkey’s ISE National 100 Index gained 0.9 percent.
The MSCI emerging-market gauge has climbed 4.6 percent this year, trailing the 8.7 percent increase for the MSCI World Index of developed-nation shares. The emerging-markets index trades at 12 times reported earnings, compared with 15 for the MSCI World, data compiled by Bloomberg show.
Data on second-quarter U.S. gross domestic product is due tomorrow before an Aug. 31 speech by Federal Reserve Chairman Ben S. Bernanke at an annual meeting in Jackson Hole, Wyoming.
The Markit iTraxx SovX CEEMEA Index of east European, Middle Eastern and African credit-default swaps fell two basis points, or 0.02 percentage point, to 237 today. The extra yield investors demand to own emerging-market bonds over U.S. Treasuries declined one basis point to 320, according to JPMorgan Chase & Co.’s EMBI Global Index.
The ruble weakened 0.6 percent against the dollar for the biggest decline among emerging-market currencies. Poland’s zloty depreciated 0.3 percent versus the euro after Marek Belka, the central bank governor, said in an interview with Radio PiN in Warsaw that prospects for cutting interest rates have increased.
The Bloomberg JPMorgan Asia Dollar Index slipped less than 0.1 percent, the third day of declines. Yuan forwards fell, trading at the biggest discount to the onshore rate since March 2009, on speculation China’s government will favor a weaker currency to support exports.
Taiwan’s Taiex Index (TWSE) sank 1.4 percent, the biggest drop among emerging-market equity gauges tracked by Bloomberg. TPK fell 7 percent and Chimei slid 5.9 percent. TPK said yesterday its board approved a plan to raise as much as $250 million from selling five-year convertible bonds and global depositary receipts backed by as many as 22 million shares. Chimei said its board approved a plan to sell 600 million new shares.
“Investors are worried this would dilute the earnings per share” of both companies, Peggy Lee, an analyst at Capital Management Co., said by phone from Taipei today.
China Southern, Asia’s biggest carrier by passengers, sank 2.8 percent. Net income fell 85 percent to 424 million yuan ($67 million), under international accounting standards, as the economic slowdown eroded travel demand and fuel costs rose.
AngloGold Ashanti, the third-largest producer of the metal, retreated to the lowest level since July 23. Gold slipped 0.5 percent in New York while copper lost 0.4 percent.
PT Bumi Resources, Asia’s biggest power-station coal exporter, tumbled 15 percent in Jakarta for the largest slide since May 2010 and the biggest decline in the MSCI emerging markets index.
PT Recapital Asset Management, an investment fund management group, didn’t repay Bumi $231 million that was due Aug. 27, London-listed Bumi Plc, which owns 29 percent of Bumi Resources, said in a statement today. Bumi Resources was also cut to underperform from neutral at CIMB Group Holdings Bhd., Southeast Asia’s top-ranked investment bank.
Bumi Resources has fallen 19 percent in two days after reporting a first-half loss of $322 million. The slump is “irrational” and the company’s sales and growth are “operationally sound,” Dileep Srivastava, a director at Bumi Resources, said in an e-mailed response to questions today.
India’s Sensex index fell for a third day. The Bharatiya Janata Party renewed its demand for Prime Minister Manmohan Singh’s exit amid a sixth day of protests in parliament today. The ruling Congress Party is seeking to end two years of policy gridlock in the current parliamentary session to revive an economy growing at the slowest pace in three years.
The Shanghai Composite Index, a gauge of mainland-listed shares traded mostly by Chinese investors, climbed 0.9 percent amid speculation state-owned companies will increase stock buybacks. Baoshan Iron & Steel Co. (600019) advanced 10 percent on plans to spend as much as 5 billion yuan ($787 million) purchasing its own shares.
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