Emerging Stocks Drop Led by Biggest Technology Slump in 3 Weeks

Emerging-market stocks fell, driven by the biggest slump in technology shares in three weeks, on concern waning demand for iPhones will hurt suppliers while energy producers declined with oil prices.

Hon Hai Precision Industry Co. (2317) and Catcher Technology Co. dragged Apple Inc. suppliers lower for a second day, with a gauge of technology stocks falling 1.5 percent. Brazilian oil producer OGX Petroleo & Gas Participacoes SA stoked a 0.6 percent drop in the Bovespa index, while OAO Novatek (NVTK), Russia’s largest independent gas producer, slumped in London.

The MSCI Emerging Markets Index declined 0.7 percent to 1,073.48 in New York. Apple Inc. cut orders for iPhone 5 displays this quarter by about 50 percent, the Nikkei newswire reported yesterday. The U.S. risks economic and social calamity if the $16.4 trillion debt ceiling isn’t increased, President Barack Obama said. The 21 nations in the emerging-markets gauge send an average 17 percent of their exports to the U.S., World Trade Organization data show.

The Apple order reduction report “hit the supply chain and there were big declines in Taiwan’s component producers,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP in London, said by e-mail. “Commodity prices are impacting Russia, hurting sentiment in the Middle East.”

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, dropped 0.4 percent to $44.47. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, climbed 4.3 percent to 17.25.

Debt Ceiling

Obama insisted yesterday he won’t negotiate on raising the debt ceiling because the U.S. has no choice other than to pay for spending it has authorized. The Standard & Poor’s 500 Index (SPX) added 0.1 percent in New York as a rally in retail and transportation stocks overshadowed concern about talks on raising the debt ceiling.

OGX lost 3 percent in Sao Paulo. BRF-Brasil Foods SA also fell 3 percent as directors of the world’s largest poultry exporter meet today to discuss a possible replacement of Chairman Nildemar Secches, Valor Economico reported, without saying where it got the information.

Property developer Gafisa SA (GFSA3) jumped 6.1 percent in Sao Paulo, the highest close since March 15, after reporting that sales almost tripled in the fourth quarter. Mexico’s IPC Index (MEXBOL) slipped 0.3 percent.

Oil Slumps

KGHM Polska Miedz SA (KGH) dragged Poland’s WIG20 Index to the lowest level since Dec. 13. Russia’s Micex Index added 0.1 percent, and Novatek dropped 1.5 percent in London.

Crude dropped from a four-month high, retreating 0.9 percent to settle at $93.28 in New York as Standard & Poor’s GSCI spot commodity index lost 0.5 percent. A gauge of emerging- market energy stocks dropped 0.8 percent, the most in a month.

South Korea’s Kospi index dropped 1.2 percent, the most in two months, as Samsung Electronics Co. (005930) sank 2.6 percent. Taiwan’s Taiex index lost 0.8 percent. Both measures were the biggest decliners among major Asian benchmark gauges today.

The Shanghai Composite Index (SHCOMP) of domestic Chinese shares gained 0.6 percent to the highest level in seven months, while while the Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. retreated 0.5 percent. E-Commerce China Dangdang Inc. (DANG), China’s biggest online book retailer, dropped 3.6 percent to lead Chinese Internet stocks traded in New York lower.

The BSE India Sensitive Index, or Sensex, closed at a two- year high as foreign funds increased holdings of the nation’s shares amid government measures to revive economic growth.

President Arrest

Pakistan’s benchmark stock index, the KSE100 gauge, tumbled the most since August 2011 after a report that the nation’s top court ordered the arrest of Prime Minister Raja Parvez Ashraf. Qatar’s benchmark QE stock index capped its biggest three-day drop in a year.

In South Africa, platinum producers gained as the metal used mainly in pollution control devices in cars and in jewelry climbed to a three-month high. Impala Platinum Holdings Ltd., the world’s second-biggest producer of the metal, jumped 1.7 percent in Johannesburg.

Anglo American Platinum Ltd. said it will idle four mine shafts in South Africa, cutting output by 400,000 ounces a year, after a review of its operations. The stock tumbled 3.7 percent to the lowest level since Dec. 31.

The leu strengthened to the highest in more than 11 months as JPMorgan Chase & Co. (JPM) said Romanian bonds are eligible for its emerging-market government bond index. The rand declined for the sixth time in seven days against the dollar, weakening 1.3 percent, as concern deepened the country’s trade deficit will worsen.

IPhone Sales

The MSCI Emerging Markets Index (MXEF) has risen 1.7 percent this year, trailing a 3.3 percent gain in the MSCI World Index of developed-country stocks. The measure for emerging markets trades at 10.9 times, compared with the MSCI World’s multiple of 13.3, data compiled by Bloomberg show.

A gauge of technology shares dropped 1.5 percent, the most since Dec. 21, leading declines among the broader emerging- market index’s 10 industry groups.

Apple sank to the lowest level since February today after the Nikkei report underscored concerns about iPhone 5 sales and the wider smartphone market. Steven Milunovich, an analyst at UBS AG, reduced his iPhone sales estimates in December due to reports of a 30 percent production cutback in Asia, according to a research report issued yesterday.

Catcher, which makes casings for Apple, dropped 3.4 percent in Taipei to its lowest close in more than two months. Hon Hai, which assembles iPhones, declined 3.4 percent, the lowest level since Oct. 29. Its client Dell Inc., the personal-computer maker that lost almost a third of its value last year, is in buyout talks with private-equity firms, two people with knowledge of the matter said.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 1 basis points, or 0.01 percentage point, to 265 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

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

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