Emerging-market stocks slumped after Federal Reserve Chairman Ben S. Bernanke said the central bank may reduce the pace of economic stimulus later this year. Brazil’s Ibovespa and the real tumbled to four-year lows.
Commodity companies Vale SA and OGX Petroleo & Gas Participacoes SA plunged in Sao Paulo. The Shanghai Composite Index dropped to a six-month low as China Citic Bank Corp. and China Minsheng Banking Corp. slid after the repurchase rate, a measure of interbank funding availability, jumped to the highest level since 2011. OAO Gazprom snapped a two-day gain in Moscow, while KGHM Polska Miedz SA sank in Warsow amid a decision to pay higher dividends than proposed by management.
The MSCI Emerging Markets Index lost 1.4 percent to 940.62, the lowest close since Sept. 5. Fed Chairman Bernanke said the U.S. central bank may start dialing down its unprecedented bond-buying program this year and end it entirely in mid-2014 if the economy finally achieves the sustainable growth the Fed has sought since the recession ended in 2009.
“You might have an earlier beginning of tapering,” Clement Miller, an investment strategist at Wilmington Trust Investment Advisors Inc., which manages about $20 billion in assets, said by phone from Baltimore. “The market is looking at the news and saying there’s greater risk the Fed will pull back given what they said about the U.S. economy being stronger than before.”
All 10 groups in the emerging-market index fell today as commodity shares had the biggest losses. The broad measure has tumbled 11 percent this year, compared with a 10 percent advance in the MSCI World Index of developed-country stocks.
The iShares MSCI Emerging Markets Index exchange-traded fund slid 3.1 percent to $38.61, the lowest close in a year. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, gained 1.2 percent to 26.50.
Brazil’s Ibovespa lost 3.2 percent after earlier rising as much as 0.5 percent. Iron-ore producer Vale snapped a two-day rally, while OGX plunged 15 percent. The real sank 1.9 percent to 2.2247 per dollar. Mexico’s IPC index slid 1.1 percent.
The Micex Index (INDEXCF) slid 0.9 percent in Moscow as Gazprom, which has the second-biggest weighting on the gauge, retreated 1.7 percent. The dollar-denominated RTS Index, which entered a bear market on June 5, dropped 1.7 percent.
Poland’s WIG20 (WIG20) index dropped the most since April 17. KGHM Polska, the nation’s sole copper and silver producer, tumbled 6.9 percent. The dividend means the company would have to raise a similar amount in debt to finance the dividend and unrelated investments, Chief Executive Officer Herbert Wirth said today.
The Shanghai Composite Index fell 0.7 percent, the lowest close since Dec. 13, as surging money-market rates signal a cash shortage is worsening and speculation grew regulators are considering resuming approvals of initial public offerings. China Citic Bank retreated 1.8 percent, while China Minsheng Banking lost 2 percent. The Hang Seng China Enterprises Index dropped 1.5 percent.
The Borsa Istanbul Stock Exchange National 100 Index climbed 1.4 percent after the central bank offered zero funding at its one-week repo auction for a second time in little over a week, tightening funding for lenders.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries slid 12 basis points to 312 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.