Most Emerging Stocks Drop as Indian Banks Plunge on Higher Rates

Most emerging-market stocks fell and the rupee strengthened after India’s central bank raised two interest rates to support the nation’s currency. Chinese developers and coal producers slid, while solar companies rose.

The S&P BSE Bankex index, a gauge of 13 Indian lenders, plunged 4.6 percent, heading for the biggest drop since July 2009. The nation’s bonds tumbled and the rupee climbed 0.7 percent versus the dollar. China National Building Material Co. Ltd dropped 3 percent in Hong Kong on speculation the government will expand property curbs. Coal producer Shougang Fushan Resources Group Ltd (639) slumped 5.9 percent after saying profit fell. GCL-Poly Energy Holdings Ltd. (3800) led solar stocks higher on a Chinese plan to boost capacity.

Almost three stocks declined for every two that rose on MSCI Emerging Markets Index, which added 0.2 percent to 954.21 as of 2:17 p.m. in Hong Kong. The Reserve Bank of India increased the marginal standing facility rate and the bank rate to 10.25 percent from 8.25 percent late yesterday. China’s city of Hangzhou may start a property tax trial, China Securities Journal reported.

Growth in developing Asia will be weaker than initially estimated this year and next amid a slower expansion in China and lackluster export demand from advanced nations, the Asian Development Bank said.

The region’s gross domestic product will probably increase 6.3 percent in 2013 and 6.4 percent next year, the Manila-based lender said in a report today. In April, it forecast expansion of 6.6 percent this year and 6.7 percent in 2014.

India Rates

ICICI Bank Ltd., India’s second-largest lender, fell 5.4 percent, while Yes Bank Ltd. plunged 8.5 percent. The S&P BSE Sensex of the nation’s shares slid 1.3 percent as Morgan Stanley cut its year-end target for the index by 6.9 percent.

“Banks’ profitability will take a hit after this rate hike,” Vishal Narnolia, a Mumbai-based banking analyst at SMC Global Securities Ltd., said by phone. “The lenders will now have to raise deposit rates or borrow funds from money markets at higher rates. The higher cost of funds cannot be fully passed on, as lending growth is already at a three-year low.”

The yield on the nation’s 8.15 percent bonds due June 2022 jumped 42 basis points to 8.1 percent, the most since January 2009.

The monetary authority also said it will conduct open-market sales of government debt totaling 120 billion rupees ($2 billion) on July 18, a step that would drain cash from an economy expanding at the slowest pace in a decade.

The Hang Seng China Enterprise Index was little changed in Hong Kong. The Shanghai Composite Index’s property gauge dropped 0.8 percent.

Property, Polysilicon

China National Building Material fell for the first time in five days. Developer Gemdale Corp. slid 2.1 percent in Shenzhen. Shougang Fushan sank the most in two weeks after saying first-half net income probably declined substantially amid a slump in coal prices.

Polysilicon producers GCL-Poly Energy climbed 7.2 percent and OCI Ltd. advanced 5.2 percent in Seoul. China, the world’s biggest maker of solar panels, plans increase the nation’s solar installed capacity fivefold to more than 35 gigawatts by 2015, the State Council said yesterday.

South Korea’s Kospi Index lost 0.5 percent while the Jakarta Composite Index gained 0.3 percent. Trading volume on Taiwan’s Taiex Index was 15 percent above the 30-day average.

Anta Sports rallied 6.9 percent after Bank of America Corp. raised its price target for the stock and reiterated its buy recommendation.

The MSCI Emerging Martets gauge has lost 9.6 percent this year and trades at about 10 times its 12-month projected earnings. The MSCI World Index of developed nations has gained 12 percent in 2013 and trades at 13.8 future earnings.

To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.