Emerging Market Stocks Decline on China, Europe Concerns

Emerging-market stocks fell, with the benchmark index (VXEEM) closing at the lowest level in six weeks, as concern deepened about economic growth in China and falling exports to Europe.

The MSCI Emerging Markets Index (MXEF) dropped 0.8 percent to 939.51, the lowest since July 26. Sany Heavy Industry Co. (600031), China’s biggest maker of excavators, fell to a two-year low in Shanghai after the Securities Times reported the country’s industrial output growth may slow. South Korea’s Kospi Index tumbled 1.7 percent while Russia’s Micex lost 1 percent. Brazil’s Bovespa gauge advanced 1.1 percent with steelmaker Usinas Siderurgicas de Minas Gerais SA leading the gains.

China’s 2012 industrial output growth may slow to about 10 percent, from 13.9 percent in 2011, the Securities Times said today, citing a joint report by the Ministry of Industry and Information Technology and the Chinese Academy of Social Sciences. Euro-area services and manufacturing contracted more than initially estimated in August, according to Markit Economics. The European Central Bank will decide tomorrow on a proposal to buy bonds as it seeks to stem the debt crisis.

“The global risk sentiment is being affected by data coming from Europe,” Benoit Anne, head of emerging-markets strategy at Societe Generale SA, said by phone from London. “In addition, the growth picture tends to influence the equity markets and there is continued concern of growth dynamics weighing quite a bit on Asian markets.”

ETF Slides

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, decreased 0.5 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slid 1.5 percent.

The Bovespa rose 1.1 percent, with preferred shares of Usiminas, as the Belo Horizonte, Brazil-based company is known, rising 18 percent to a three-month high. Brazil’s government raised tariffs on products ranging from steel to petrochemicals, boosting the outlook for domestic sales.

A European gauge based on a survey of purchasing managers fell to 47.2 from 47.9 in July, London-based Markit Economics said today. That’s below an initial estimate of 47.5 published on Aug. 23. A composite index of both services and manufacturing fell to 46.3 from 46.5, also below an initial estimate.

MSCI’s gauge of developing nations has risen 2.5 percent this year, trailing a 7.7 percent increase by the MSCI World Index (MXWO) of advanced-nation equities. 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.

Minsheng, Lenovo

The Hang Seng China Enterprises Index (HSCEI) declined 1.9 percent, the most since October. The Shanghai Composite Index slid 0.3 percent to the lowest level since February 2009 as Sany Heavy lost 3.7 percent.

The extra yield investors demand to own emerging-market bonds over U.S. Treasuries dropped 5 basis points, or 0.05 percentage point, to 314, according to JPMorgan Chase & Co.’s EMBI Global Index.

China Minsheng Banking Corp. sank 3.7 percent to the lowest level since Oct. 21 after JPMorgan downgraded the stock and Sanford C. Bernstein & Co. said non-performing loans at Chinese lenders may increase. Lenovo Group Ltd. (992), the world’s second- largest computer maker, slumped 7.6 percent in Hong Kong after NEC Corp. sold its stake in the company.

To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Sridhar Natarajan in New York at snatarajan15@bloomberg.net;

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

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