Emerging-market stocks fell, led by technology companies, after Taiwan Semiconductor Manufacturing Co. (2330)’s sales forecast trailed estimates. Hungarian equities capped their worst week in almost two years, while Indonesia’s rupiah weakened for a record 11th day.
Taiwan Semiconductor, the world’s largest contract maker of chips, dropped the most in more than four years in Taipei, dragging a technology gauge to the steepest two-day loss in a month. OTP Bank Nyrt., Hungary’s biggest lender, tumbled 9.1 percent after Chief Executive Officer Sandor Csanyi sold shares. Yuan forwards rose the most in eight weeks after China removed a lower limit on banks’ lending rates to reduce companies’ funding costs and boost flexibility for lenders.
The MSCI Emerging Markets Index retreated 0.7 percent to 950.47, trimming the weekly gain to 0.5 percent. TSMC joined Intel Corp. this week with disappointing sales outlooks as Microsoft Corp. to Google Inc. reported lower-than-estimated profits.
“A lot of the decline is due to a weakness in earnings from the technology side, which could be an adjustment to somewhat slower growth,” Brian Jacobsen, who helps oversee $221.2 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said by phone.
A gauge of technology stocks in the MSCI Emerging Markets Index slid for a second day, losing 1.7 percent, the most among 10 industry groups. Largan Precision Co., an optical lens maker, tumbled the most since January in Taipei.
The iShares MSCI Emerging Markets Index exchange-traded fund fell 0.3 percent to $39.28. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 6.2 percent to 24.70.
Twelve-month non-deliverable yuan forwards strengthened 0.08 percent against the dollar, increasing the advance this week to 0.15 percent. The lending rate decision is part of moves by China’s leadership to make the nation’s interest rates and currency exchange mechanism more market-oriented, as the world’s second-largest economy grew at the slowest pace in three quarters in April-June.
The Ibovespa retreated 0.5 percent, extending the worst year-to-date rout among major emerging markets as Brazil’s faltering economic growth prompted JPMorgan Chase & Co. to reaffirm its sell recommendation on the country’s stocks. State-run power utility Centrais Eletricas Brasileiras SA capped its biggest weekly drop in six weeks after workers went on strike July 15.
Hungary’s BUX Index slid 3.8 percent. OTP Bank, which accounts for 28 percent of the gauge by weighting, sank the most since September 2011 with trading volume more than six times the three-month average.
Csanyi sold a combined 1.7 million OTP shares he held personally and in a company he controls, the lender said in a statement today. OTP lost 17 percent of its market value this week, leading the BUX to its worst week since September 2011 after the government announced plans to retroactively amend the terms of foreign-currency loans.
The Borsa Istanbul Stock Exchange National 100 Index (XU100) fell 1.5 percent in a second day of losses. JPMorgan lowered its recommendation on Turkish stocks to neutral from overweight, citing “headwinds around the lira and rising rates.”
Russia’s Micex Index (ALTMCEX) added 0.4 percent, led by a 4.2 percent jump in Severstal, a steel and mining company.
Poland’s WIG20 Index advanced 0.6 percent as Grupa Lotos SA, the nation’s second-biggest oil company, rose 2.1 percent.
MSCI’s emerging-markets measure has dropped 9.9 percent this year, compared with a 13 percent gain in the MSCI World Index. The developing-nation index trades at 10 times projected 12-month earnings, lower than the MSCI World’s 13.9 times, according to data compiled by Bloomberg.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose five basis points, or 0.05 percentage point, to 311 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.
The Indonesian currency extended declines as the nation’s central bank manages a gradual depreciation of the onshore exchange rate toward offshore levels. Bank Indonesia (BMRI) Deputy Governor Perry Warjiyo said on July 11 that the monetary authority has supplied dollars to the market in the past two to three months while allowing the rupiah to slowly retreat.
Taiwan Semiconductor tumbled 6.9 percent, dragging Taiwan’s benchmark measure by 1.6 percent, the most in five weeks. Taiwan Semiconductor forecast third-quarter sales of as much as NT$164 billion ($5.5 billion) in the three months ending September. That compared with the NT$164.5 billion average of 25 analyst estimates compiled by Bloomberg before the announcement.
“The guidance is slightly lower than expectations,” said Alan Tseng, vice president of Capital Investment Management Corp. in Taipei, which has a neutral rating on TSMC. “The company isn’t likely to post stunning growth anymore.”