Emerging stocks reversed earlier gains as commodity producers paced losses in Brazil’s Ibovespa, overshadowing a surprise interest rate cut in South Korea. Turkey’s benchmark measure slumped from a record-high.
OGX Petroleo & Gas Participacoes SA, the oil producer controlled by Brazilian billionaire Eike Batista, plunged 6.3 percent. Koc Holding AS (KCHOL), Turkey’s biggest group of companies, tumbled after its chairman said members of the founding family may reconsider selling about 100 million shares. Samsung Electronics jumped the most this month in Seoul.
The MSCI Emerging Markets Index lost 0.1 percent to 1,060.58. Commodity producers slumped as oil, gold and copper retreated. China’s consumer inflation stayed subdued in April, while the Bank of Korea joined central banks in Australia, Europe and India in cutting rates to boost growth. Stocks briefly extended losses after Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank would be “limited” in capability for more stimulus.
“The surprise easing from the Bank of Korea did help, but unless people believe China is going to have a resurgence of industrial growth, commodity prices will be soft,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management which oversees $170 billion, said by phone. “And the commodity producers, like Brazil, will be affected by that.”
Gauges of energy and raw material producers in the gauge of emerging markets lost at least 0.1 percent, while a measure of technology stocks jumped to a 13-year high. The gauge of developing nations has gained 0.5 percent this year, compared with a 12 percent increase in the MSCI World Index of developed-country stocks.
The iShares MSCI Emerging Markets exchange-traded fund slid 0.7 percent to $43.91. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 2.5 percent to 18.54.
Brazil’s Ibovespa slumped 0.6 percent as OGX extended a three-day drop to 16 percent as the nation’s stock exchange increased the short-interest limit on the stock. In a short sale, traders sell borrowed stock, anticipating the price will drop so they can profit by buying back shares at a lower price. Bets against the company soared to a record yesterday.
Mexico’s IPC index dropped 1 percent to the lowest since November. Corp. Geo SAB, the nation’s second-biggest homebuilder by sales, slumped 4.8 percent.
Turkey’s Borsa Instanbul index dropped 1 percent as Koc posted the biggest slump since Nov. 14. Benchmark measures in Poland and the Czech Republic declined, while Hungarian stocks gained. Russian markets are closed for a national holiday today and most organizations remain closed tomorrow.
South Korea’s Kospi Index (KOSPI) rallied 1.2 percent to a one-month high, while the won weakened 0.5 percent against the dollar, depreciating for the first time in five days. Samsung rose 1.8 percent, while Hyundai Mipo Dockyard (010620) Co. jumped the most in the gauge of developing nations.
The Shanghai Composite Index slipped 0.6 percent, while while the Hang Seng China Enterprises Index (HSCEI) lost 0.2 percent as a slump in producer prices signaled demand is weakening in the world’s second-biggest economy. India’s S&P BSE Sensex fell 0.3 percent, its first decline in four days, as some investors judged the recent rally that drove the benchmark index to more than a three-month high as excessive. Malaysia’s 10-year bond yield slid to the lowest in more than four years.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries dropped five basis points, or 0.05 percentage point, to 265 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.