Emerging-market stocks fell, paring the biggest weekly rally in more than a month, as disappointing earnings at Microsoft Corp. dragged down computer companies and foreign investment in China fell more than economists forecast.
The MSCI Emerging Markets Index (MXEF) lost 0.7 percent to 1,006.07 at the close of trading in New York, its first retreat in four days. Quanta Computer Inc. (2382), the world’s largest laptop maker, declined for a third day in Taipei, and Samsung Electronics Co. fell for the first time in five days in Seoul. Brazil’s Gerdau SA (GGBR4), the biggest producer of steel in Latin America, fell the most since May, and Russian steelmaker OAO Severstal dropped for the first time in four days as metals slumped.
Information technology companies led declines in emerging stocks, paring the gauge’s largest weekly advance since the period ended Sept. 14 to 0.9 percent. Microsoft, the largest software maker, and Google Inc., the biggest search engine, reported profits and sales that missed analysts’ estimates. China’s foreign direct investment fell for the 10th time in 11 months.
“People are being cautious given the weakness in some of the U.S. bellwethers, like Google and Microsoft,” Ed Kuczma, an investment analyst at Van Eck Associates Corp., which manages $38 billion, said by telephone from New York. “I think people had pretty high expectations, and they’re being challenged right now.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, fell 1.6 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, gained 10 percent.
Brazil’s Bovespa dropped 1.4 percent, dragged down by commodity producers. South Korea’s Kospi (KOSPI) index and Taiwan’s Taiex (TWSE) index both lost 0.8 percent, Russia’s Micex Index lost 1 percent, Poland’s WIG20 Index sank 2 percent and India’s Sensex slipped 0.6 percent. The Shanghai Composite Index slid 0.2 percent.
Gerdau slipped 4.4 percent in Sao Paulo, the most since May 4, and Vale SA (VALE3), the world’s largest iron-ore producer, slipped 1.7 percent. Severstal declined 2.2 percent in Moscow.
The S&P GSCI gauge of 24 raw materials slipped 1.4 percent and copper for delivery in three months fell 2.5 percent on the London Metal Exchange.
The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong gained 0.4 percent, lifted by Dongfeng Motor Group Co. (489) after Daiwa Capital Markets Hong Kong Ltd. said car sales in the nation may grow in October.
A gauge of technology stocks in emerging markets sank 1.3 percent, led by Taiwanese and Korean companies, posting the biggest decline in the MSCI Emerging Markets Index. The broader measure has climbed 9.8 percent this year, trailing an 11.8 percent increase in the MSCI World Index (MXWO) of developed countries. The emerging-markets gauge trades at 11.6 times estimated earnings, compared with the MSCI World’s multiple of 13.3, according to data compiled by Bloomberg.
India’s rupee weakened 0.8 percent against the dollar on speculation importers stepped up purchases of the dollar to meet payments. Hungary’s forint declined 0.3 percent against the euro and 10-year bond yields rose for a second day this week as the Economy Ministry said its forecasts no longer assume potential benefits from an aid deal with the International Monetary Fund and demand for riskier assets ebbed.
Emerging-market equity funds recorded a sixth week of inflows, taking in $1.5 billion, according to Citigroup Inc., citing EPFR Global. China-focused funds took a “huge portion” of inflows into Asia, raking in $444 million, Citigroup said.
Reports this week showed China’s economy grew 7.4 percent in the third quarter, matching analyst estimates, while industrial output rebounded. U.S. housing starts surged to a four-year high in September, while European leaders committed to establishing a euro-area bank supervisor by year-end, opening the prospect of direct aid to Spain’s banks.
Zoomlion Heavy Industry Science and Technology Co., China’s second-biggest maker of construction equipment, dropped 3.1 percent after closing yesterday at the highest level since May 31.
China’s government won’t provide big economic stimulus and a strong rebound in growth is unlikely, Song Guoqing, an adviser to the People’s Bank of China, said in a speech at Tsinghua University in Beijing yesterday. Local-government investment plans in China probably won’t materialize quickly because they’re reliant on the central government and banks for funding, PBOC’s Song said.
Foreign direct investment in the world’s second-largest economy fell 6.8 percent from a year earlier, the Ministry of Commerce said in Beijing today. Economists predicted a 3.5 percent drop, according to the median of six estimates in a Bloomberg survey.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose five basis points, or 0.05 percentage point, to 275, according to JPMorgan Chase & Co.’s EMBI Global Index.
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