Emerging-Market Stocks Drop to Four-Month Low on Bird Flu
Emerging-market stocks dropped to the lowest level since November, led by airlines, on concern that a bird flu outbreak in China may deter people from traveling as tensions in the Korean peninsula escalate.
EVA Airways Corp. (2618) and China Airlines Ltd. (2610) paced declines among Taiwanese carriers. Central European Distribution Corp., Poland’s second-biggest vodka producer, plunged to a record low after filing for U.S. bankruptcy protection. Brazil’s Bovespa index (MEXBOL) rose for a second straight trading day as Eike Batista’s mining unit MMX Mineracao & Metalicos SA surged the most in a month. The won weakened to an eight-month low.
The MSCI Emerging Markets Index slid 0.1 percent to 1,006.78 in New York, dropping a sixth day. China reported three more cases of the deadly H7N9 strain, bringing the total number of infections to 21. The virus has killed six people. South Korean Chief of National Security Kim Jang Soo said yesterday that North Korea may stage a provocation including a ballistic missile test on or around April 10.
“Tensions have ratcheted up more than people expected,” Peter Jankovskis, the chief investment officer at Lisle, Illinois-based Oakbrook Investments LLC, said in a phone interview. His firm oversees $3.3 billion. China’s bird flu also has an impact on markets, he said. “People will be more reluctant to trade, to travel.”
Technology and commodity shares had the biggest losses among 10 groups in the MSCI Emerging Markets Index (MXEF) today. The broader index has lost 4.6 percent this year, compared with a 6.6 percent gain in the MSCI World Index (MXWO) of developed-country stocks. The developing-nations measure trades at 10.5 times estimated 12-month earnings, compared with the MSCI World’s multiple of 13.8, according to data compiled by Bloomberg.
The iShares MSCI Emerging Markets Index exchange-traded fund gained 0.2 percent to $41.68. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 2.1 percent to 18.75.
The Bank of New York Mellon Korea ADR index, which tracks the American depositary receipts of South Korean companies, dropped 0.5 percent in New York to the lowest level since Sept. 6. LG Display Co. dropped 1.1 percent to $13.33.
The Bovespa (IBOV) advanced 0.1 percent, erasing an earlier decline of as much as 1.3 percent. MMX jumped 7.3 percent. The Mexican IPC Index advanced 0.4 percent, snapping three days of losses as homebuilder Desarrolladora Homex SAB gained 3.9 percent, the biggest jump in a month.
Russian shares erased earlier gains as Federal Grid Co. and OAO MRSK Holding, the nation’s largest power grid companies, tumbled on concern minority shareholders won’t be able to benefit from their merger. The Micex Index dropped 0.6 percent to the lowest level since November.
Poland’s WIG20 Index lost 0.1 percent. CEDC (CEDC) plunged 41 percent in New York to the lowest level since its listing in 1998. The Warsaw-based company sent a bankruptcy petition with a pre-approved restructuring plan aimed at cutting $665.2 million in liabilities, it said in a statement yesterday.
The Shanghai Composite Index slid 0.6 percent to the lowest level since Dec. 27. The Hang Seng China Enterprises Index was little changed. Taiwan’s Taiex Index (TWSE) retreated 2.4 percent as EVA Airways and China Airlines slumped more than 6 percent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries dropped six basis points, or 0.06 percentage point, to 291 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
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