Emerging-market stocks tumbled the most in 10 months, led by Russian and South African shares, as exporters slumped after weaker China manufacturing data bolstered concern the global economy is faltering.
OAO Gazprom, Russia’s biggest gas producer, declined 4.4 percent as crude retreated for a third day, while Brazilian iron-ore producer Vale SA dropped the most in a week. Taiwan Semiconductor Manufacturing Co., the world’s largest contract maker of chips, slumped the most since June in Taipei. South Africa’s rand weakened as much as 1.3 percent against the dollar earlier today before rebounding after the central bank kept its benchmark interest rate unchanged to curb inflation.
The MSCI Emerging Markets Index dropped 2.1 percent to 1,025.92, the most since July 23. Stocks joined a global slump as China’s manufacturing contracted for the first time in seven months. Federal Reserve Chairman Ben S. Bernanke told Congress yesterday that the flow of asset purchases will slow as the employment outlook “improves in a real and sustainable way.”
“China is the source of marginal global growth, so when they have a hiccup, it echoes through the global economic system,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $380 billion, said by phone. “The action that’s driven stocks higher has been that hand of the Fed. So when the Fed speaks on this issue, it’s not just tapping on the brakes, investors fear it’s more standing like on the brakes.”
All 10 groups in the developing-nation measure declines as energy and technology shares slid at least 2.5 percent. The broad index has lost 2.8 percent this year, compared with a 12 percent increase in the MSCI World Index. The gauge’s 30-day volatility rose to 12.5, the highest level in seven months.
The iShares MSCI Emerging Markets Index exchange-traded fund retreated 0.7 percent to $42.64. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, surged 7.9 percent to 20.41.
Brazil’s Ibovespa fell for the first time in five sessions as a slowdown in China, the nation’s top trading partner, dimmed the outlook for commodity exporters. Raw material producers account for about 42 percent of the index’s weighting, according to data compiled by Bloomberg. Vale dropped 1.8 percent.
Mexico’s IPC Index gained 1 percent, the most among the world’s main equity benchmarks, rebounding from the lowest level since September.
Russian stocks led the losses among major emerging-market gauges as the Micex Index (INDEXCF) dropped 3.6 percent. Gazprom dropped to a one-month low, while OAO Mechel and OAO Novolipetsk Steel fell at least 4.7 percent as metals retreated.
The Borsa Istanbul Stock Exchange National 100 Index dropped from an all-time high, while benchmark gauges in the Czech Republic, Poland and Hungary slid at least 0.4 percent.
South Africa’s FTSE/JSE Africa All-Share (JALSH) Index lost 2.3 percent as African Bank Investments Ltd. sank 3.2 percent. The rand has slumped almost 7 percent against the dollar since reaching a four-month high on May 3, restricting the central bank’s ability to stimulate an economy.
The Hang Seng China Enterprises Index of mainland companies dropped the most since April 5, while the Shanghai Composite Index slid 1.2 percent. PetroChina Co. (857), the nation’s No. 1 energy producer, slid 2.9 percent. The Taiex Index fell the most since April 8 as Taiwan Semiconductor tumbled 3.6 percent. India’s benchmark index slid a fourth day as State Bank of India plunged after profit fell short of estimates.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose six basis points, or 0.06 percentage point, to 273 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.