Emerging Stocks Drop as India Output Slump Offsets China Exports

Emerging-market stocks fell to a two-month low as a decline in Indian factory output and Japan’s contracting economy overshadowed faster Chinese export growth. The yuan climbed to a 19-year high.

The MSCI Emerging Markets Index (MXEF) slipped 0.2 percent to 989.27 at the close of trading in New York, the lowest close since Sept. 13. Online game maker NCsoft Corp. (036570) sank to the lowest level since May 2010 in Seoul. United Spirits Ltd. (UNSP) surged 35 percent in Mumbai after Diageo Plc said it will buy a controlling stake. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steel-maker by output, rose the most in a week as Goldman Sachs Group Inc. recommended buying the stock.

Indian industrial production unexpectedly dropped in September, while Japanese data showed the economy shrank in the three months through September and may face its third recession since 2008. In China, export growth beat estimates last month and a government quota will be increased to allow more yuan raised overseas to be invested in domestic capital markets.

“The global economic slowdown should discourage most investors from taking aggressive equity positions,” Jitra Amornthum, the head of research at Finansia Syrus Securities Pcl in Bangkok, said by phone today. “There is no clear sign that most major economies are on pace for strong growth again.”

South Korea’s Kospi index retreated 0.2 percent to its lowest close since Nov. 1. Russia’s Micex Index rose for the first time in four days, climbing 0.5 percent. Brazil’s Bovespa fell to the lowest level since Sept. 5, losing 0.5 percent as utilities declined for a seventh day.

Rupee Weakens

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, rose 0.4 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, lost 4.8 percent.

The BSE India Sensitive Index, or Sensex (SENSEX), dropped less than 0.1 percent, dragged lower by a 1.7 percent decline in Tata Steel Ltd. The rupee weakened 0.2 percent against the dollar on its third day of declines. Data today showed output at factories, utilities and mines retreated 0.4 percent from a year earlier, compared with the median estimate of a 2.8 percent gain in a Bloomberg News survey.

China’s yuan strengthened to close at 6.2291 per dollar, according to the China Foreign Exchange Trade System. The government reported the fastest export growth in five months and the central bank raised its reference rate.

China’s overseas sales increased 11.6 percent from a year earlier in October and the nation’s $32 billion trade surplus was the largest since January 2009, official data showed on Nov. 10. The securities regulator said China will increase the quota for its Renminbi Qualified Foreign Institutional Investor program that allows yuan raised overseas to be invested in stocks and bonds in domestic markets.

China Outperformance

“There is room for more outperformance for Chinese stocks, as valuation should gradually converge to the emerging-markets average,” Martial Godet, head of strategy at BNP Paribas CIB in London, said by e-mail.

China’s Shanghai Composite Index (SHCOMP) added 0.5 percent, snapping a five-day losing streak. Abu Dhabi’s ADX General Index (ADSMI) climbed 1.3 percent to the highest level since July 2011, led by Eshraq Properties Co.

The MSCI Brazil/Utilities Index (MXBR0UT) fell for a seventh day to the lowest level since September 2009. Companhia Energetica de Sao Paulo dropped 6.5 percent after the company’s third-quarter adjusted net income of 149.6 million reais ($73 million) came in short of the average 162.5 million reais estimate by six analysts surveyed by Bloomberg.

Military Operations

Israel’s shekel dropped 0.6 percent versus the dollar to the lowest level in over eight weeks as the country’s leaders said they “won’t hesitate” to escalate military operations against the Gaza Strip after two days of Palestinian rocket attacks.

Gauges (MXEF0CD) of materials and industrial companies led declines among the 10 industry groups in the MSCI Emerging Markets Index, falling by at least 0.6 percent. The developing-nations measure has climbed 8 percent this year, outpacing a 7.8 percent increase by the MSCI World Index. (MXWO) The emerging-markets index trades at 11.3 times estimated earnings, compared with the MSCI World’s multiple of 13.05, according to data compiled by Bloomberg.

HTC Corp. (2498), Asia’s second-largest smartphone maker, jumped 6.9 percent in Taipei to the highest in two weeks. Apple Inc. settled all global lawsuits with HTC, Chief Executive Officer Tim Cook said in a statement yesterday.

Tata, Usiminas

Tata Steel fell to a two-month low after reporting an unexpected second-quarter loss. The net loss, including Tata Steel Europe Ltd., was 3.64 billion rupees ($66.5 million) in the three months ended Sept. 30. The median profit estimate of 24 analysts in a Bloomberg survey was 2.27 billion rupees.

Usiminas gained 1.3 percent in Sao Paulo. Goldman Sachs Group Inc. raised its recommendation to “buy” from “neutral.”

OAO Veropharm, a Russian drugmaker, climbed 8.5 percent in Moscow to the highest close since Sept. 19. Billionaire Vladimir Evtushenkov’s holding company AFK Sistema won regulatory approval to acquire the Russian drugmaker, Russia’s Federal Anti-Monopoly Service said in a statement.

NCsoft, a South Korean online-game maker, slid 4.5 percent in Seoul to the lowest close since May 2010.

United Spirits climbed the most on record. Diageo will pay $2.04 billion for the controlling stake.

Eshraq Properties, a real estate developer, surged 9.7 percent in Abu Dhabi, the biggest gain since February.

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

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