Emerging Stocks Head for Six-Week Low Amid Turkey, Egypt Unrest

Emerging-market stocks headed for the lowest level in more than six weeks on concern mutual fund outflows will accelerate as investors weigh the prospect of a cut in Federal Reserve stimulus. Turkish shares slid after a fifth night of anti-government protests.

Akbank TAS led losses in Istanbul after Bank of America Merrill Lynch lowered the lender to underperform. Egypt’s benchmark EGX30 Index was the second-worst performer worldwide after Japan’s Nikkei-225 Stock Average. SM Investments Corp. fell 3.1 percent in Manila, driving the Philippine benchmark index to the lowest level in 10 weeks. Zoomlion Heavy Industry Science & Technology Co. slipped to a record in Hong Kong before its removal from the FTSE China A50 Index. Russia’s Micex Index declined to a one-year low.

The MSCI Emerging Markets Index lost 0.6 percent to 998.36, the lowest level on a closing basis since April 18, by 2:05 p.m. in London. International money managers pulled a combined $1.6 billion from Indonesia, Thailand and the Philippines since May 22, the most since August 2011, data compiled by Bloomberg show. Fed Bank of Dallas President Richard Fisher called for a reduction in the central bank’s bond purchases, which economists from Goldman Sachs Group Inc. and Deutsche Bank AG predict may be curbed from September.

“There will probably be more money outflows from the region on speculation about the Fed tempering its quantitative easing program,” Sukit Udomsirikul, an analyst at Maybank Kim Eng Securities (Thailand) Pcl, the nation’s biggest brokerage, said in Bangkok. “The outflows may be just the beginning.”

Turkey Slides

Gauges of consumer-discretionary and health care companies shares in MSCI’s developing-nation index slid at least 1 percent, the most among 10 industry groups.

Brazil’s Bovespa index fell 0.3 percent, sliding for the first time in three days. The iShares MSCI Emerging Markets Index slipped 1.2 percent, poised for its lowest level since May 31.

Turkey’s Borsa Istanbul National 100 Index fell 2.1 percent, extending its weekly loss to 8 percent, while the lira weakened and bonds retreated. Protesters accusing Prime Minister Recep Tayyip Erdogan of autocratic governance and citing grievances including alleged police brutality and curbs on alcohol sales clashed overnight with the police, who responded with tear gas and water cannons in about 10 cities.

Akbank, the Turkish lender part-owned by Citigroup Inc., dropped 3.1 percent, extending its weekly retreat to 7.8 percent. BofA lowered the stock from neutral.

The Egyptian gauge slumped 2.9 percent, the most in six months. There are lots of “factors weighing in on investors minds and none are positive,” said Teymour El-Derini, director of MENA sales trading at Naeem Brokerage in Cairo. “It’s the water issue with Ethiopia,” jailing of non-governmental organization workers which might affect “our chances” of getting an International Monetary Fund deal and “planned anti-government protests” on June 30, El-Derini said.

Rand Depreciates

Russia’s Micex Index slid 0.8 percent, led by utilities Federal Grid Co and OAO Russian Grids, and miner OAO Mechel, which slumped 6.6 percent to the lowest level since 2009. Federal Grid dropped 6.8 percent and Russian Grids lost 4.6 percent.

The rand weakened for a second day, extending its depreciation this year to 13 percent. South Africa’s Reserve Bank Governor Gill Marcus said price stability remains the central bank’s primary focus even as growth slows. The prospects for capital inflows into South Africa are “less certain” than in recent years, increasing the risks of funding the current-account deficit, the central bank said in its Monetary Policy Review yesterday.

Polish Rates

Poland’s WIG20 Index erased losses of as much as 0.6 percent and climbed 0.2 percent. The central bank cut borrowing costs to a record as the European Union’s largest eastern economy grapples with its worst slowdown in four years. The 10-person Monetary Policy Council lowered the reference rate by a quarter-point to 2.75 percent, matching the estimate of 38 of 40 economists surveyed by Bloomberg.

The Philippine Stock Exchange Index declined 1.7 percent, its third day of losses. SM Investments fell to the lowest close since March 19. The Jakarta Composite Index retreated 0.4 percent.

South Korea’s Kospi index fell 1.5 percent as the won strengthened against the yen, hurting the competitiveness of exporters. The Thai baht weakened to a five-month low against the dollar.

Goldman Sachs economist Jan Hatzius and Joseph Lavorgna at Deutsche Bank predicted the tapering may begin from September. Kansas City Fed President Esther George yesterday urged a reduction in bond buying as growth quickens, while San Francisco Fed President John Williams said a “modest adjustment downward” in the purchases is possible as early as this summer.

Companies in the U.S. hired fewer workers than projected in May, the ADP Research Institute reported today, before the Labor Department’s monthly payrolls report in two days.

Index Inclusion

Thailand’s SET Index slipped 2.1 percent, the most in two months. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong declined 0.6 percent to its lowest since April 23.

Benchmark indexes in Qatar and Dubai dropped after Maria Gratsova, an analyst at Citigroup Inc., said in a report today that the United Arab Emirates and Qatar won’t win an upgrade to emerging-market status at MSCI Inc. this month.

Trading volume at the FTSE Bursa Malaysia KLCI Index was 39.5 percent below the gauge’s 30-day average, according to data compiled by Bloomberg. Volume at the Shanghai Composite Index was 26 percent below the average.

Zoomlion, China’s second-largest maker of construction equipment, retreated 2.6 percent in Hong Kong ahead of its removal from the A50 Index effective June 24.

BS Financial Group Inc. slumped 7.6 percent in Seoul, a record decline. The Financial Supervisory Service yesterday ordered BS Financial and its banking unit to reprimand some staff as they violated banking and regulatory rules.

The emerging-markets index has dropped 5.5 percent this year, compared with a 9.4 percent gain in the MSCI World Index. The developing-nation index trades at 10.2 times projected 12-month earnings, compared with the MSCI World’s 13.5 times, data compiled by Bloomberg show.

-- Editors: Ash Kumar, Gavin Serkin

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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