Most Emerging Stocks Fall on U.S. Fiscal Cliff Deadline

Most emerging-market stocks declined, as consumer and energy companies fell amid wrangling between U.S. lawmakers over a solution to avert more than $600 billion in spending cuts and tax increases.

Paper maker Klabin SA dropped the most since May, leading a slump in raw-material producers in Brazil. National Societe Generale Bank (NSGB) plunged 9.9 percent in Cairo after the biggest shareholder sold its stake in the Egyptian lender for less than market value. Samsung Electronics Co. (005930) climbed 2.9 percent to a record, boosting a gauge of developing-nation technology stocks to its highest level since April 2000.

The MSCI Emerging Markets Index (MXEF) was little changed at 1,042.56 in New York, with 390 stocks falling and 384 rising, after advancing over the past six days. Commodities plunged the most in a week and oil dropped for the first time in three days after Republican House Speaker John Boehner said the White House is not serious about cutting spending to prevent the cuts and tax increases that are due to come into force at the start of January. Data today showed U.S. retail sales climbed less than expected in November.

“There’s a lot of concern about the fiscal cliff in the U.S.,” Seth Freeman, chief executive officer at EM Capital Management LLC, said by phone from San Francisco. “It’s just classic uncertainty. Investors, no matter how experienced, are more cautious.”

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, lost 0.4 percent to $43.19 in New York. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, increased 0.4 percent to 21.22.

Budget Dispute

The MSCI Emerging Markets Index has advanced 14 percent this year, compared with a 12 percent increase in the MSCI World Index. (MXWO) The developing-nations measure trades at 12 times estimated earnings, compared with the MSCI World’s multiple of 13.6, data compiled by Bloomberg show.

The Fed for the first time yesterday linked the outlook for its main interest rate to unemployment and inflation and said it will expand its asset purchase program by buying $45 billion a month of Treasury securities starting in January to spur the economy.

Boehner repeated his insistence that President Barack Obama’s budget proposal is “anything but” balanced, and accused the president of being “not serious” about cutting spending. The two are meeting today at the White House for talks on how to avoid the spending cuts and tax increases, scheduled to start taking effect in January. Oil fell 1 percent as the Standard & Poor’s GSCI Index of commodities dropped for the first time in three days.

Brazil, Mexico

Brazil’s Bovespa Index dropped 0.3 percent, with Klabin leading declines. The Mexican IPC Index declined 0.4 percent, breaking a seven-day winning streak, while benchmarks in Argentina, Chile and Colombia also fell.

The Istanbul Stock Exchange National 100 (XU100) index declined 0.6 percent, falling for the first time in five days. Russia’s Micex slipped 0.2 percent, snapping a six-day run of gains. Benchmark indexes in Poland and Turkey also retreated.

South Korea’s won climbed 0.2 percent to a 15-month high and China’s yuan rose 0.3 percent, the most since October. Romania’s leu strengthened 1 percent to its strongest level against the euro since May 10.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed two basis points, or 0.02 percentage point, to 269 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

Consumers Slump

The MSCI Emerging Markets/Consumer Staples Index fell 0.6 percent, the worst performer among the 10 industry groups on the emerging-markets gauge. Technology stocks led gains, climbing 1.4 percent.

Samsung Electronics, whose market value surpassed $200 billion for the first time last week, rose for a second day, buoyed by a stronger earnings outlook. LIG Investment & Securities Co. and IBK Securities Co. yesterday raised their share-price estimates, citing improving prospects for earnings in 2013.

“There is optimism that a global economic recovery will boost consumer demand and that is driving technology stocks higher,” Gopal Agrawal, chief investment officer at Mirae Asset Global Investments (India) Pvt. in Mumbai, said by phone today. “Emerging-market equities have run up quite a bit now and investors will keenly watch the U.S. fiscal-cliff negotiations and corporate performance in the upcoming earnings season for more cues.”

Liquid Crystal

Emerging-market stocks in eastern Europe, Middle East and Africa could outperform developed shares in 2013, Alexander Redman and Arun Sai, analysts at Credit Suisse Group AG (CSGN) in London, said in an emailed report today. The bank recommends increasing holdings in Russia and Hungary, while reducing investments in Poland and South Africa.

Chimei Innolux Corp. (3481), Taiwan’s biggest maker of liquid- crystal displays, rallied 6.9 percent, after the Economic Daily News reported that the company aims to increase sales by 10 percent in 2013 and as Hyundai Securities Co. said the industry is set to recover on higher China demand. AU Optronics Corp. (2409), Taiwan’s second-largest, climbed 6.9 percent.

National Societe Generale Bank, Egypt’s second-biggest publicly traded lender by assets, sank the most since March 2011. Societe Generale SA (GLE) sold its 77.2 percent stake to Qatar National Bank SAQ (QNBK) for $1.97 billion, valuing the shares at 35.54 Egyptian pounds each according to Arqaam Capital.

Tata Motors Ltd. (TTMT) jumped 4.1 percent to the highest level since May 15 in Mumbai. Retail deliveries at Jaguar Land Rover rose 14 percent to 29,893 units in November, the luxury carmaker said in a statement yesterday.

Asia Gains

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong retreated 0.2 percent. The Shanghai Composite Index (SHCOMP) dropped 1 percent, led by financial companies and materials producers. South Korea’s Kospi index advanced 1.4 percent, the most among Asian emerging markets.

PT Adaro Energy, Indonesia’s biggest coal producer by market capitilzation, led gains in the emerging markets index. The stock surged 9.6 percent in Jakarta amid speculation coal prices at a six-month high will bolster earnings.

PT Unilever Indonesia (UNVR), a unit of the world’s second-largest consumer goods company, posted its worst two-day slump in 12 years in Jakarta trading after a series of downgrades and target price cuts by five brokerages. The stock has fallen 22 percent in the past two days.

To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net; Emma O’Brien at eobrien6@bloomberg.net

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