Emerging-market stocks tumbled as Brazil’s Ibovespa (IBOV) became the first of the major developing-nation indexes to enter a bear market amid concern that global central banks will pare economic stimulus measures.
The Ibovespa closed 21 percent below this year’s high, led by a plunge in Brazilian billionaire Eike Batista’s OGX Petroleo & Gas Participacoes SA and LLX Logistica SA. The MSCI BRIC Index slipped for a 10th day, the longest slide since at least January 1995. Russian shares dropped to a one-year low as commodity producers slipped. Qatar and the United Arab Emirates were upgraded to emerging-market status at MSCI Inc., while Greece lost its classification as a developed market.
The MSCI Emerging Markets Index retreated 1.9 percent to 954.38, the lowest level since Sept. 6, while its 50-day volatility increased to a seven-month high. Stocks joined a global selloff as the Bank of Japan refrained from more stimulus that tend to weaken the yen. Federal Reserve Chairman Ben S. Bernanke said last month that its quantitative easing program of bond purchases could slow if U.S. employment showed improvement.
“There’s an indiscriminate selling,” Paul Christopher, the St. Louis-based chief international strategist at Wells Fargo Advisors, said by phone. His firm oversees about $1.3 trillion. “This is a reaction to the excessive optimism created around the Bank of Japan’s announcement and how long the Fed will keep quantitative easing in place.”
All 10 groups in a measure of developing-nation stocks slumped as health-care and commodity shares had the biggest losses, dropping at least 2.4 percent. The broad gauge extended this year’s drop to 9.6 percent, compared with a 9.3 percent jump in the MSCI World Index.
The iShares MSCI Emerging Markets Index exchange-traded fund slid 1.9 percent to $39.38. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, surged 11 percent to 26.28.
MSCI, whose stock gauges are tracked by investors with about $7 trillion in assets, downgraded Morocco to a frontier market. MSCI will keep South Korea and Taiwan’s emerging-market status, and placed China A-shares on review for potential inclusion in the emerging-markets category, according to a statement today. Israel wasn’t added to the MSCI Europe Index.
The Ibovespa plunged into a bear market as Brazil’s faltering economic expansion drove down consumer stocks and raw-material exporters slid with commodities. OGX tumbled 9.3 percent today, while LLX retreated 7.4 percent.
Russia’s Micex Index (INDEXCF) dropped 2.5 percent on concern commodities will extend declines, curbing growth in the world’s biggest energy exporter. Basic materials companies led the retreat as OAO Gazprom sank 3.8 percent.
The Borsa Istanbul Stock Exchange National 100 Index sank 1.8 percent to the lowest level since Dec. 3, led by Turkiye Garanti Bankasi AS (GARAN), the country’s biggest lender. Turkey’s lira strengthened, erasing earlier losses, as the central bank implemented exceptional tightening measures to shield the currency from volatility triggered by anti-government protests.
The Hang Seng China Enterprises Index (HSCEI) dropped 1.7 percent in Hong Kong, the lowest close since Oct. 8. The gauge retreated for a 10th day, its longest losing streak since November 1995. Chinese markets are shut until June 13 for holidays, and Hong Kong will also be closed tomorrow.
India’s S&P BSE Sensex declined 1.5 percent, its lowest close since April 18. Thailand’s SET Index slid 5 percent, the largest drop since October 2011, the baht weakened to an eight-month low and government bonds declined. The Philippine Stock Exchange Index slumped 4.6 percent, the biggest loss since September 2011. The Jakarta Composite Index (JCI) tumbled 3.5 percent, the lowest level since Feb. 19.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 11 basis points to 328 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.