Emerging Stocks Drop as Policy Makers Disagree on Growth Plan

Emerging-market stocks fell for the first time in three days as global policy makers clashed on ways to boost economic growth and Chinese companies from ZTE Corp. (000063) to Yunnan Copper (000878) Industry Co. predicted losses.

The MSCI Emerging Markets Index slid 0.1 percent to 995.22 at the close of trading in New York. ZTE, China’s second-largest maker of telephone equipment, sank the most in three months in Hong Kong while Yunnan Copper lost 2.4 percent in Shenzhen. Cosan SA Industria e Comercio, the world’s biggest sugar-cane processor, tumbled in Brazil after IstoE magazine said the government wants gasoline stations to lower prices. Vakiflar Bankasi TAO (VAKBN), a Turkish state-run lender, snapped a six-day rally as Goldman Sachs Group Inc. recommended selling the stock.

Finance chiefs at the International Monetary Fund meeting left Tokyo over the weekend at odds, with South Korea’s central bank chief urging Asia to add stimulus as Russia and Brazil called on rich nations to fix their own challenges. At stake is a world economy Bank of Israel Governor Stanley Fischer calls “awfully close” to recession.

“Messages from the IMF and other policy makers are more negative,” Christian Keller, an emerging-markets analyst at Barclays Capital in London, said by telephone. “People have a little bit more doubt whether things will come together in Europe.”

Eight of the 10 industry groups in the MSCI Emerging Markets Index slumped, led by consumer discretionary stocks. The developing-nations measure has climbed 8.6 percent this year, trailing an 11 percent increase by the MSCI World Index (MXWO) of developed countries. The emerging-markets index trades at 11.4 times estimated earnings, compared with the MSCI World’s multiple of 13.2, data compiled by Bloomberg show.

IMF Disagreements

The IMF meetings ended yesterday with delegates disagreeing over the right degree of budget austerity. Brazil central bank President Alexandre Tombini said the country will defend itself from short-term capital flows that bring financial instability and inflation risks amid an easing push from major economies.

Bank of Korea Governor Kim Choong Soo said there is “ample room for promoting domestic demand-driven growth, especially in Asia.” He said “further fiscal and monetary stimulus should help boost domestic demand and ultimately the world recovery.”

The iShares MSCI Emerging Markets Index (MXEF) exchange-traded fund, the ETF tracking developing-nation shares, rose 0.6 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, fell 3.6 percent.

Benchmark gauges in Russia, South Korea and Taiwan declined. China’s Shanghai Composite Index (SHCOMP) slipped 0.3 percent to 2,098.70, the lowest level in a week.

Sensex Gains

Brazilian stocks erased earlier losses and gained as stocks linked to domestic consumption rose amid signs that Brazil’s economic recovery is picking up.

Homebuilder Brookfield Incorporacoes SA jumped 4.4 percent to 4 reais. Online retailer B2W Cia. Global do Varejo rose 2.9 percent to 12.05 reais. Cosan sank 4.5 percent to 36.86 reais. The Bovespa gained 0.7 percent.

Brazil’s seasonally adjusted economic activity index , a proxy for gross domestic product, rose in August at the fastest pace since March 2011, the central bank said Oct. 11.

The BSE India Sensitive Index (SENSEX) gained 0.2 percent, erasing the day’s earlier losses, on speculation the central bank will cut interest rates to revive the economy even as inflation quickened.

The South African rand weakened 0.8 percent versus the dollar, the biggest decline among emerging-market currencies, after Standard & Poor’s cut the country’s credit rating on Oct. 12. The Indonesian rupiah and Thai baht also dropped.

Micex Slides

Vakifbank slumped 1.2 percent as Goldman Sachs lowered the stock to sell from neutral, while Raspadskaya slipped 2.7 percent as Deutsche Bank cut the shares to hold versus buy.

Russia’s Micex index lost 0.2 percent as preliminary results showed Kremlin-backed candidates dominated Russia’s first gubernatorial elections in eight years.

The forint climbed 0.3 percent versus the euro, on increased speculation Hungary will reach an aid agreement with the IMF.

China’s consumer prices rose 1.9 percent last month, close to the slowest pace in two years, the statistics bureau said. Producer prices dropped 3.6 percent, accelerating from a 3.5 percent decline in the previous month, it said.

“Inflation data continues to point to slack demand, with industrial prices contracting at a rapid pace,” Alistair Thornton, an economist with IHS Global Insight in Beijing, wrote in a report.

ZTE (763) plunged 16 percent, the biggest decliner in the developing-nations gauge, after saying its third-quarter net loss was probably as much as 2 billion yuan ($319 million). That compared with a profit of 299.3 million yuan a year earlier.

Copper, Zinc

Yunnan Copper fell 2.4 percent, the third day of declines in Shenzhen, after forecasting a net loss in the third quarter of about 307.8 million yuan.

Belle International Holdings Ltd. (1880), China’s largest retailer of women’s shoes, fell 4.3 percent in Hong Kong, the largest drop since Aug. 22, after reporting footwear same-store sales growth climbed 2.8 percent in the third quarter. The growth rate was at the bottom end of the company’s targets, according to Deutsche Bank.

Korea Zinc Co. (010130), the world’s third-biggest producer of refined zinc, which earns about half of sales from silver and gold, slumped 7.1 percent in Seoul. Gold and silver fell for a second day.

Vietnam Dairy Products Joint-Stock Co. (VNM), the nation’s biggest listed dairy producer, rose 4.2 percent to a record in Ho Chi Minh City trading after reporting nine-month pretax profit surged 35 percent from a year earlier.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell six basis points, or 0.06 percentage point, to 285, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.