Emerging-market stocks fell for the first time in 10 days and most currencies weakened after U.S. Federal Reserve policy makers said they will probably end debt purchases that have fueled investor demand for riskier assets.
Samsung Electronics Co. Ltd. (005930), which got 28 percent of revenue from America in the third quarter, dropped 1.2 percent. Gold Fields Ltd. (GFI), South Africa’s second-largest producer of the metal, and PKN Orlen SA (PKN), Poland’s biggest oil company, fell for the first time in three days as commodities retreated. Brazilian iron-ore producer Vale SA (VALE3) declined and MediaTek Inc. (2454), Taiwan’s largest chip designer, slumped the most since April after UBS AG cut its stock rating.
The MSCI Emerging Markets Index lost 0.4 percent to 1,077.9 in New York, falling from the highest level since Aug. 2011. The gauge, which is having its best start to a year since 2010, pared its decline after U.S. data showed employers added workers last month and the jobless rate matched a four-year low. Fed board members said they will probably end their $85 billion of monthly bond purchases in 2013, minutes of their Dec. 11-12 meeting issued yesterday show.
“Given how strong the markets have been, this is probably more of a correction,” Greg Lesko, who helps manage about $750 million at Deltec Asset Management said by phone from New York. “People are very reactive to what the Fed’s doing because the Fed has a huge balance sheet. If we get a big change in bond buying there could be some competition for things like emerging market debt.”
The iShares MSCI Emerging Markets Index (MXEF) exchange-traded fund, the ETF tracking developing-nation shares, gained 0.2 percent to $45 in New York, after earlier sliding as much as 0.7 percent. The ETF added 3 percent this week. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, fell 5.1 percent to 17.82, dropping for a fourth day.
“Emerging-market assets have enjoyed a nice rally recently, and I think it’s a healthy pause,” Chu Moon Sung, fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $30 billion, said by phone in Seoul. “While some may be worried of the Fed’s potential end of bond purchases, this could be seen as a sign of its confidence in the recovery of the economy.”
The MSCI Emerging Markets Index surged 108 percent during the Fed’s first round of bond purchases, known as quantitative easing. The gauge has climbed 9.8 percent since the Fed announced a third round on Sept. 13. The 21 nations in MSCI’s developing-nations gauge send about 17 percent of their exports to the U.S. on average, data compiled by the World Trade Organization show.
U.S. payrolls rose by 155,000 workers last month, after gaining a revised 161,000 in November, Labor Department figures released in Washington today showed. The unemployment rate in the world’s biggest economy held at 7.8 percent, matching the lowest level since December 2008.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong sank 0.4 percent, the most since Dec. 21. Brazil’s Bovespa (IBOV) index dropped 1.3 percent and Poland’s WIG20 Index (WIG) fell 1 percent. South Korea’s Kospi index lost 0.4 percent, while the CSI 300 Index (SHSZ300) rose less than 0.1 percent as mainland Chinese markets traded for the first time this year. Vietnam’s VN Index (VNINDEX) rallied 1.6 percent, the biggest one-day advance since October. Russian markets were closed for holidays.
India’s rupee lost 1.1 percent against the dollar, the most since Nov. 5, and the Indonesian rupiah weakened 1.4 percent. Hungary’s forint and the Polish zloty sank 0.5 percent against the euro.
Emerging-market stock funds attracted $3.4 billion in the week to Jan. 2, Citigroup Inc. said in a report today that cited EPFR Global data. Global equity funds drew $5.1 billion in the week to Jan. 2, exceeding the $2.3 billion that went into bonds, according to the report.
Eight of the 10 industry groups in the MSCI Emerging Markets Index retreated today, led by technology and materials companies. The developing-nations measure’s 2.2 percent climb this week compares with a 3.3 percent increase in the MSCI World Index. (MXWO) The emerging-markets index trades at 11 times estimated earnings, compared with the MSCI World’s multiple of 13.2, according to data compiled by Bloomberg.
The cost of protecting against swings in emerging-market equities was at a record low this week as investors bet the stocks will extend gains. Implied volatility for three-month options closest to the iShares MSCI ETF fell to 18.68 Jan. 2, an all-time low.
Samsung Electronics dropped 1.2 percent, taking its two-day decline to 3.2 percent. LG Display Co. (034220), the world’s second- largest maker of liquid-crystal displays, sank 2.5 percent in Seoul, the most since Dec. 21.
Gold Fields, AngloGold Ashanti Ltd. (AU) and Harmony Gold Mining Co. (HMY) all dropped more than 3 percent in Johannesburg. Gold futures slid 1.5 percent to settle at $1,648.90 an ounce on the Comex in New York for its sixth week of declines, the longest run of weekly losses since 2004. Silver slumped 2.5 percent.
Korea Zinc Co. (010130), which produces gold and silver, sank 7 percent to the lowest level since Aug. 9. The stock was the worst performer in the MSCI Emerging Markets Index.
PKN Orlen declined 2.1 percent in Warsaw. Grupa Lotos SA (LTS), Poland’s second-biggest oil company, slipped 3.7 percent.
Vale, the world’s largest iron-ore miner, fell 2.2 percent in Sao Paulo. Preferred stock of power producer Eletropaulo Metropolitana Eletricidade de Sao Paulo SA slipped 5 percent after its valuation climbed to the most expensive level in at least two years Jan. 2.
Oil gained 0.2 percent in New York, after earlier slipping as much as 1.5 percent. The Standard & Poor’s GSCI index of 24 raw materials fell 0.5 percent.
MediaTek tumbled 6.3 percent in Taipei after UBS downgraded its stock rating to neutral, citing concerns about weaker smartphone demand in China and fiercer price competition.
Gome Electrical Appliances Holding Ltd. (493) climbed 6.6 percent in Hong Kong, the most in the MSCI Emerging Markets Index. The company was named among CCB International Securities Ltd.’s picks on progress in turning around its business, according to a report dated yesterday.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 1 basis point, or 0.01 percentage point, at 246 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.