Emerging-market stocks fell, snapping the longest rally since October 2011 in the benchmark index, as Apple Inc. (AAPL) suppliers tumbled on iPhone sale concerns and the U.S. budget standoff reduced risk appetite.
Hon Hai Precision Industry Co. (2317), which assembles iPhones in Taipei, slumped the most since April, while Largan Precision Co. (3008), a camera lens supplier for Apple, led a gauge of developing-nation technology stocks to the steepest loss in two months. OGX Petroleo e Gas Participacoes SA sank to a two-week low in Sao Paulo. Polskie Gornictwo Naftowe i Gazownictwo SA, or PGNiG (PGN), rose to the highest since Jan. 2008 after UniCredit SpA upgraded the stock. Mexico’s IPC Index rose to a record high as the Shanghai Composite Index (SHCOMP) surged to the highest since August.
The MSCI Emerging Markets Index (MXEF) lost 0.3 percent to 1,040.02 by 4:34 p.m. in New York, halting eight days of gains. The gauge has jumped 13 percent this year. Apple suppliers sank after Citigroup Inc. cut estimates for iPhone shipments and downgraded the Cupertino, California-based company’s stock. U.S. lawmakers haven’t reached a deal on the budget with two weeks until more than $600 billion in automatic spending cuts and tax increases, known as the fiscal cliff, come into force.
“We are highly vulnerable if the fiscal cliff doesn’t get resolved or if there are extensive delays, but the outlook for 2013 for emerging markets is relatively constructive,” said Geoffrey Dennis, the global emerging-markets strategist at Citigroup Inc. in New York, said by phone. “There may have been a short-term hit from Apple. The link between Apple technology and these markets is somewhat tenuous, but of course it plays a role.”
The 21 countries in the emerging-markets index send about 17 percent of their exports to the U.S., according to data compiled by the World Trade Organization.
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, gained 0.3 percent to $43.50, paring a 15 percent gain this year. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, declined 1.6 percent to 20.67.
Brazil’s Bovespa Index (IBOV) was little changed, while OGX sank 5.3 percent, the most since Nov. 26. Mexican IPC Index (MEXBOL) added 0.7 percent to a close at a record high, adding to a yearly advance of 17 percent. Grupo Financiero Inbursa SAB led advances in Mexico City, jumping 4.8 percent, the biggest advance since Aug. 16.
Russia’s Micex Index (INDEXCF) climbed 0.5 percent, set to advance 4.8 percent this year. The Moscow Exchange will add 20 new stocks to the ruble-denominated Micex Index from tomorrow, making its composition identical to the 50-stock RTS Index, which will remain priced in dollars.
President Barack Obama and House Speaker John Boehner met for about 45 minutes at the White House today with two weeks remaining to avert the so-called fiscal cliff. Obama is considering a possible budget concession on Social Security cost-of-living increases after Boehner dropped his opposition to raising tax rates for some top earners, two people familiar with the talks told Bloomberg News.
The ruble weakened for a third day versus the dollar, while the South African rand strengthened 0.9 percent. The Hungarian forint weakened 1.4 percent versus the euro, the biggest slump this year.
PGNiG, Poland’s biggest gas distributor, climbed 2.7 percent in Warsaw. UniCredit upgraded its target price to 5.42 zloty in an e-mailed note released on Dec. 14 after the end of trading.
Dallah Healthcare Holding Co. (DALLAH), a Saudi Arabian provider of medical services, surged 51 percent on its trading debut in Riyadh.
OAO GMK Norilsk Nickel added 3.7 percent, the highest close since March 19 in Moscow. The company’s board appointed billionaire Vladimir Potanin chief executive officer as a part of an agreement with United Co. Rusal to resolve a feud among shareholders in the world’s largest nickel producer.
“It’s been a good run,” Aurelija Augulyte, an emerging- markets strategist at Nordea Bank AB in Copenhagen, said by e- mail. “Fiscal cliff still remains a concern, so investors would rather take profits now.’
Slowest in Decade
The Shanghai Composite advanced 0.5 percent as a government plan to boost urbanization spurred gains in commodity producers. The Chinese stock gauge closed at the highest level since Aug. 10.
The BSE India Sensitive Index (SENSEX), or Sensex, slipped 0.4 percent in Mumbai, while the rupee weakened 0.7 percent against the dollar. Asia’s third-largest economy may expand at about 5.7 percent to 5.9 percent in the year through March, less than an earlier estimate of as much as 7.85 percent, the Finance Ministry said in a mid-year review today. That would be the slowest pace in a decade and matches the 5.8 percent estimate released by the central bank in October.
Hyundai Motor Co. (005380) slid 2 percent, while affiliate Kia Motors Corp. slumped 3.6 percent. Hyundai Mobis Co., South Korea’s biggest auto-parts maker, dropped 3 percent and Mando Corp., which also manufactures automotive parts, retreated 4.1 percent. South Korea’s Kospi (KOSPI) slid 0.6 percent, trimming a 8.6 percent advance for the year.
The gauge of information technology stocks in the MSCI Emerging Markets Index sank 1.4 percent, its biggest decline in two months and the most among 10 industry groups. Taiwan’s Taiex Index fell 0.9 percent, paring a 7.9 percent advance this year.
‘‘When the demand for the iPhone slows down, all these sub- parts might eventually slow down as well,” Tan Lip Kwang, who helps manage the equivalent of $1 billion at K&N Kenanga Holdings Bhd., said by phone in Kuala Lumpur. “The weakening of the Japanese yen” translates into increased competition for Korean and Taiwanese suppliers.
The prospect of weak iPhone 5 shipments creates near-term earnings downside for Apple’s supply chain, and the companies will probably see further selling pressure in the near term, Kevin Chang, an analyst at Citigroup, wrote in a note dated Dec. 14. The bank lowered its recommendation on Apple to neutral from buy and reduced its price target to $575 from $675.
Largan Precision dropped 5.5 percent to its lowest close since Nov. 23 in Taipei. Hon Hai Precision, the world’s largest contract maker of electronics, tumbled 4.7 percent. Speaker supplier AAC Technologies Holdings Inc. retreated 5.7 percent in Hong Kong. Flexium Interconnect Inc., another Apple vendor, fell 6.3 percent in Taipei.
Huabao International Holdings Ltd. jumped 7.1 percent in Hong Kong, for the biggest gain in the MSCI emerging-market gauge.
The MSCI developing-nations index’s 13.5 percent advance this year compares with 12.9 percent increase in the MSCI World Index (MXWO) of developed countries. The emerging-markets gauge trades at 11.9 times estimated profit, compared with the MSCI World’s 13.7, according to data compiled by Bloomberg.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed by four basis points, or 0.04 percentage point, to 268 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
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