Emerging Stocks Fall From Two-Week High on China, Europe Concern

Emerging-market stocks fell from a two-week high amid concerns that China’s economic slowdown is deepening and Europe will struggle to contain its debt crisis.

FAW Car Co. (000800), which makes cars in China with Volkswagen AG, sank 2 percent after Chinese passenger-vehicle sales trailed analysts’ estimates for a second month in August and the government increased gasoline and diesel prices. Sesa Goa Ltd. (SESA), India’s biggest iron-ore exporter, slumped 6.2 percent after the state of Goa halted mining of the material. Russia’s Micex Index fell for the first time in five days and the ruble weakened.

The MSCI Emerging Markets Index (MXEF) slipped 0.1 percent to 969.42 as of 12:55 p.m. in London, snapping three days of gains. Macquarie Group Ltd. cut its 2012 forecast for China’s economic growth. Spanish Prime Minister Mariano Rajoy said late yesterday he won’t allow the European Central Bank to stipulate how the nation narrows its budget deficit as a condition for buying its bonds. Germany’s Federal Constitutional Court is due to rule tomorrow on the nation’s participation in Europe’s rescue fund.

“Estimates for China’s growth are being trimmed down,” Kim Dae Young, a Seoul-based fund manager at KB Asset Management Co., which manages about $26 billion in assets, said by phone today. “Investors are cautious ahead of the pending decision in Germany.”

Countries in the MSCI index send about 30 percent of their exports to the European Union on average, according to the World Trade Organization.

Banks Drop

The Shanghai Composite Index (SHCOMP) declined 0.7 percent, while the Micex slipped 0.2 percent and South Africa’s FTSE/JSE Africa All Shares Index retreated 0.7 percent. The Czech PX Index (PX) lost 0.8 percent for the biggest decline among emerging-market equity gauges tracked by Bloomberg.

The Markit iTraxx SovX CEEMEA Index of east European, Middle Eastern and African credit-default swaps declined two basis points, or 0.02 percentage point, to 209. The extra yield investors demand to own emerging-market bonds over U.S. Treasuries declined one basis point to 298, according to JPMorgan Chase & Co.’s EMBI Global Index.

Gauges of raw-materials, financial and industrial stocks were the biggest drags on the MSCI emerging-markets index. The developing-nations gauge has advanced 5.8 percent this year, trailing a 10 percent gain in the MSCI World Index of developed countries.

Macquarie cut its 2012 growth forecast for China to 7.7 percent from 8.1 percent, saying it sees the slowdown continuing into the third quarter and limited room for monetary expansion next year amid inflationary pressure.

Leadership Transition

Chinese Vice President Xi Jinping’s absence from public events for more than a week has also fueled speculation about the health of the leading candidate to succeed President Hu Jintao in a once-in-a-decade leadership change.

Since speaking at the Party School of the Communist Party on Sept. 1, Xi canceled a Sept. 5 meeting with U.S. Secretary of State Hillary Clinton. After foreign journalists in Beijing were told the same day that Xi would meet Danish Prime Minister Helle Thorning-Schmidt on Sept. 10, the event wasn’t included in an official agenda distributed Sept. 7. The foreign ministry said yesterday no such meeting was planned.

Guangzhou Automobile Group Co. slumped 2.2 percent in Hong Kong. Dongfeng Motor Group Co., which produces cars with Nissan Motor Co. in China, slipped 0.6 percent.

Wholesale deliveries, including multipurpose and sport utility vehicles, gained 11 percent to 1.22 million units last month, the China Association of Automobile Manufacturers said. That compares with the 1.4 million mean estimate of 14 analysts surveyed by Bloomberg.

Sesa Goa slumped to the lowest level since January following a ban on all mining in the western state that accounts for more than half of the nation’s overseas iron-ore sales. Sterlite Industries India Ltd. (STLT), which is set to be merged with Sesa Goa, retreated 4.6 percent.

SK Hynix Inc. (000660), the world’s second-largest maker of computer memory chips, dropped 1.4 percent in Seoul. The company may post an operating loss of 72 billion won ($64 million) in the third quarter, Shinhan Investment Corp. said in a report today.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net

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

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