Emerging ETF Falls as U.S. Economy Data Sinks Brazil to Turkey

The iShares MSCI Emerging Markets Index retreated and developing-nation stocks fell as a report showed the U.S. economy unexpectedly shrank in the fourth quarter, dimming the global outlook.

Brazilian billionaire Eike Batista’s MPX Energia SA led declines on the MSCI Emerging Markets stock index. Turkey’s Besiktas Futbol Yatirimlar Sanayi ve Ticaret AS sank the most in nearly two years, sending the benchmark index to the lowest level in 2013. Bank Pekao SA (PEO), Poland’s second-biggest lender, tumbled the most in 16 months after UniCredit SpA said it was selling a stake. Russian stocks dropped.

The iShares emerging-markets exchange-traded fund slipped 0.5 percent to $44.13 in New York, as 401 stocks on the MSCI developing-nations gauge fell while 376 rose. The U.S. economy contracted 0.1 percent last quarter, the worst performance since the second quarter of 2009. The 21 nations in MSCI index send about 17 percent of their exports to the U.S., data compiled by the World Trade Organization show.

“The U.S. economy still is the world’s biggest economy, and what happens in the U.S. matters to emerging markets,” Neil Shearing, chief emerging markets economist at Capital Economics Ltd., said by phone from London. “This will perhaps rekindle some fears of the pace of recovery in the developed world, and if that slows, growth in the emerging world will tend to slow, with export demand weakened in particular.”

The MSCI emerging-markets index fell 0.2 percent to 1,068.20, after earlier climbing as much as 0.4 percent. It has climbed 1.2 percent in January, capping the longest monthly rally in since April 2010. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the ETF and expectations of price swings, advanced 3.5 percent to 18.68.

Bovespa Falls

The U.S. Federal Reserve will keep purchasing securities at the rate of $85 billion a month as the economy paused because of temporary forces including bad weather, the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington.

“Although strains in the global financial markets have eased somewhat, the committee continues to see downside risks to the economic outlook,” the FOMC said.

Brazil’s Bovespa index lost 1.8 percent to the lowest level since Dec. 13. Oil producer OGX Petroleo e Gas Participacoes SA drove declines on the gauge, sinking 7.8 percent in the biggest slump since Aug. 29.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, sank 4.8 percent to a seven-month low. The producer said Jan. 29 that it will increase gasoline prices at refineries by 6.6 percent and diesel by 5.4 percent, stoking concern over inflation. MPX Energia plunged 10 percent in the steepest one- day drop since November 2008.

Futbol Sinks

The Istanbul Stock Exchange National 100 Index dropped 3.9 percent after the measure reached a record Jan. 24. Besiktas Futbol plunged 15 percent, the most since February 2011. The company said yesterday after the market closed that it will raise capital through a rights offer.

Russia’s Micex Index fell 0.4 percent in day trading and lost less than 0.1 percent in the evening session after the U.S. GDP figures were released.

Pekao dropped 6.4 percent in Warsaw, the most since September 2011, after UniCredit said it was selling as much as 9.1 percent of its local unit to free capital and increase earnings. The sale of as much as 23.9 million shares is valued at 3.98 billion zloty ($1.3 billion) based on yesterday’s closing price. Poland’s WIG20 Index (WIG20) lost 1.1 percent to the lowest level since Dec. 10.

Egypt Measures

Emerging stocks climbed earlier as the Shanghai Composite (SHCOMP) Index extended its bull-market rally, Egypt rebounded from a month low and economic confidence in Europe rose more than forecast.

Egypt’s EGX 30 Index added 1.5 percent, the most since Jan. 3. President Mohamed Mursi gave three regional governors authority to review emergency measures imposed in their provinces to ease tensions, after a wave of violent unrest led his defense chief to warn of the possible collapse of the state.

Fitch Ratings downgraded Egypt to B from B+, citing a worsening fiscal position, political turmoil and deteriorating economic growth. The outlook was set at negative.

The Shanghai Composite gauge jumped 1 percent, while the Hang Seng China Enterprises Index of companies listed in Hong Kong gained 0.8 percent. The Philippine Stock Exchange Index (PCOMP) rose 0.6 percent to a record, extending yesterday’s 0.7 percent gain after President Benigno Aquino said the economy grew faster than the government’s forecast in 2012. Taiwan’s Taiex Index (TWSE) and South Korea’s Kospi index climbed 0.4 percent.

Consumer Slump

A gauge of consumer stocks in the MSCI Emerging Markets index lost 0.8 percent, the most among 10 industry groups. The emerging-markets measure has gained 1.2 percent this year, trailing a 5.3 percent gain in the MSCI World Index. The developing-nations index trades for 11 times estimated profit, compared with the MSCI World’s multiple of 13.7, data compiled by Bloomberg show.

Harmony Gold Mining Co., Africa’s third-largest producer of the metal, increased 1.6 percent, the steepest gain since Jan. 18. A “breakthrough” on negotiations relating to possible job cuts may come by Feb. 6, Chief Executive Office Graham Briggs said in an interview on Johannesburg’s SAfm radio.

Capital Securities Corp. (6005) gained to a 10-month high in Taipei and China Merchants Securities Co. advanced in Shanghai after Taiwan doubled the limit mainland Chinese institutions can invest in its market.

China Railway

China Railway Group (390) added 3 percent in Hong Kong. The railway ministry plans to spend 117 billion yuan ($18.8 billion) to buy rail cars this year, exceeding the 108.2 billion yuan spent in 2012, the China Securities Journal reported, citing an unidentified person from the industry.

Korea Electric Power Corp. (KEP), which supplies all of South Korea’s electricity, tumbled 5 percent. The company has no immediate plans to further raise electricity tariffs, Yonhap News reported, citing Chief Executive Officer Cho Hwan Eik.

The South Korean won was the worst performer among emerging market currencies, weakening 0.3 percent. The Indian rupee appreciated 0.9 percent to the strongest level since Oct. 17.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose four basis points, or 0.4 percentage point, to 261, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net; Ian Sayson in Manila at isayson@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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