Emerging Stocks Head for Biggest Monthly Loss in a Year

Emerging-market stocks fell, dragging the benchmark index toward its biggest monthly loss in a year. Philippine equities tumbled the most in 20 months and South Africa’s rand traded weaker than 10 per dollar for the first time since March 2009.

San Miguel Corp. (SMC), the Philippine’s largest food and drinks company, slid 5.2 percent and Ayala Land Inc., the country’s biggest developer, retreated 6.3 percent. New World Resources Plc dropped to a record low in Prague, declining for a second day after Moody’s Investors Service lowered its credit rating. Harmony Gold Mining Co. (HAR), Africa’s third-largest producer of the metal, gained the most in more than four years in Johannesburg as gold advanced.

The MSCI Emerging Markets Index fell 0.4 percent to 1,016.02, the lowest since April 23. The gauge has lost 2.3 percent this month amid concern the Federal Reserve will scale back stimulus as the recovery strengthens. America’s economy grew at an annualized 2.4 percent pace in the first quarter, less than the 2.5 percent rate estimated earlier, the Commerce Department said today.

“Sentiment towards emerging markets is generally poor today,” Michael Wang, an emerging-market strategist at Amiya Capital LLP in London, said by e-mail. “The market is pricing in perhaps an earlier start to tapering.”

Fed Chairman Ben S. Bernanke said last week the central bank could reduce the pace of bond purchases if there is a sustained improvement in growth.

Valuation Concern

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, was unchanged at $41.96. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, lost 1.4 percent to 21.47.

The Philippine Stock Exchange Index (PCOMP) dropped 3.8 percent, the most since September 2011, on valuation concern. The Czech PX index slipped 0.5 percent while South Africa’s benchmark gauge rebounded from its biggest drop in a week, adding 1.7 percent. Markets in Brazil and Poland are closed for holidays.

The benchmark Philippine gauge is valued at 19.5 projected 12-month earnings, compared with 10.3 times for the MSCI Emerging Markets Index, according to data compiled by Bloomberg. The MSCI World Index, which has gained 0.8 percent this month, is valued at 13.7 times, the data show.

New World Resources fell 3.6 percent in Prague, extending 7.5 percent retreat yesterday when Moody’s cut NWR’s credit rating to B2 from B1 with a negative outlook, saying the coal producer’s weaker operating performance is set to continue this year.

OAO Russian Grids fell 3.4 percent in Moscow, extending yesterday’s 5.2 percent decline, before the stock is removed from the MSCI Russia Index from June 3.

Harmony Gold, Africa’s third-largest producer of the metal, advanced 17 percent, the most since November 2008. Gold Fields Ltd. (GFI) surged 10 percent. Gold rose to a two-week high.

Rand Slides

The rand depreciated 2.1 percent to 10.0442 per dollar. South Africa’s currency has dropped 11 percent this month, the most among than 25 emerging markets tracked by Bloomberg.

The country’s economy is hampered by tumbling commodity prices and a wave of labor unrest in the mining industry, President Jacob Zuma said today.

Hungary’s forint slipped 1.4 percent versus the euro, trimming this month’s gain to 1.7 percent, the biggest advance among major emerging markets.

A gauge of industrial companies in the MSCI Emerging-Markets Index dropped 1.1 percent, the most among 10 industry groups. A measure of technology stocks gained 0.5 percent, the only group to advance.

San Miguel slumped to the lowest level since November 2010 before its removal from the MSCI Philippines Index. Ayala Land tumbled the most since September 2011.

Cutting Forecast

Advantech Co. (2395), a maker of personal computers in Taiwan, slid 3.3 percent as market researcher IDC cut its forecast for shipments of personal computers. PC shipments may decline 7.8 percent this year, the worst annual drop on record, IDC said, revising its previous projection for a 1.3 percent decrease.

LS Corp. (006260) tumbled 9.5 percent in Seoul, the largest decline in the MSCI Emerging Markets Index. The company’s subsidiary was raided by prosecutors today following reports that it supplied components whose safety certificates were faked, the Busan Ilbo reported today, citing officials at the Supreme Prosecutors’ Office in Busan. Prosecutors probed its subsidiary JS Cable Co. today and took documents and data from the company, LS spokesman Jo In Mook said by phone today.

Smithfield Foods

Henan Shuanghui Investment & Development Co. (000895) jumped 8.7 percent in Shenzhen after its parent company agreed to acquire Smithfield Foods Inc. Closely-held parent Shuanghui International Holdings Ltd. agreed to buy Smithfield Foods for about $4.72 billion, the companies said in a statement yesterday.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong sank 0.6 percent to a five-week low. Vietnam’s VN Index rose 1.2 percent to the highest since February 2011.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 297 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

To contact the reporters on this story: Maria Levitov in London at mlevitov@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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