Emerging Stocks Decline on China Data as Rupiah Hits 4-Year Low

Emerging-market stocks fell as an unexpected decline in Chinese manufacturing and restrictions to Indian banks’ access to cash outweighed gains for Apple Inc. (AAPL) suppliers. Indonesia’s rupiah fell to a four-year low.

PetroChina Co. (857), the country’s biggest oil and natural-gas producer, sank 2 percent in Hong Kong, while iron-ore producer MMX Mineracao & Metalicos SA led losses in Sao Paulo. State Bank of India (SBIN), the nation’s largest lender by assets, lost 3.2 percent in Mumbai. Inventec Corp. (2356) rallied to a six-year high in Taipei after Apple’s earnings beat estimates. OTP Bank Nyrt., Hungary’s biggest lender, rose the most in 11 months.

The MSCI Emerging Markets Index slipped 0.3 percent to 966.50 as 434 of the gauge’s 820 member stocks fell. China’s manufacturing contracted faster than analysts expected in July, signaling a deepening slowdown in the world’s second-largest economy, data showed today. India’s central bank yesterday capped banks’ access to cash and raised the daily balance requirement for the reserve ratio.

“The numbers were a little bit soft,” Timothy Ghriskey, the chief investment officer at Solaris Group LLC in New York, which manages over $1.5 billion, said by phone. “Growth in China continues to decelerate, and that’s the primary reason emerging markets are weak today.”

The initial reading of 47.7 for China’s initial purchasing managers index compiled by HSBC Holdings Plc and Markit Economics compares with the 48.2 median estimate in a Bloomberg News survey of 19 economists and 48.2 in June. If confirmed in the final report Aug. 1, the gauge would be the lowest in 11 months. Readings below 50 indicate contraction.

Vale Drops

The iShares MSCI Emerging Markets Index exchange-traded fund lost 1 percent to $39.69. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, increased 1.5 percent to 22.43.

Benchmark gauges in Russia, Thailand and Indonesia lost at least 0.7 percent. Stocks rose in Hungary and the Czech Republic after a report showed manufacturing in the euro area unexpectedly expanded in July for the first time in two years.

Brazil’s Ibovespa fell 0.9 percent as MMX slipped 9.6 percent. Gafisa SA led homebuilders lower after data showed that the country’s unemployment rate unexpectedly increased in June.

The IPC index rose 0.1 percent in Mexico City, gaining a third day.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 304 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

Hungary Banks

The yield on Hungary’s three-year notes declined a third day. The Magyar Nemzeti Bank lowered the two-week rate by 25 basis points to a record 4 percent and may continue with rate cuts until the main rate falls to between 3 and 3.5 percent, Governor Gyorgy Matolcsy said yesterday.

OTP climbed 4.7 percent in Budapest. CEO Sandor Csanyi, who sold shares in the company last week, said the sale was done to finance agricultural investments while its timing was influenced by the government’s plan to help foreign-exchange mortgage borrowers. The company can survive the government plan, Csanyi said, adding that he’s in good health and doesn’t plan to retire. The BUX (BUX) index gained 1.1 percent.

Hungary wants to “phase out” foreign-currency mortgages, Economy Minister Mihaly Varga said as the cabinet discusses ways to help homeowners amid concern lenders will be forced to take losses.

OAO Uralkali slid 2.5 percent in Moscow to the lowest level since December 2010 as the world’s largest potash producer by output neared the end of a buyback.

Apple Suppliers

A gauge of technology companies in the MSCI Emerging Markets Index rose 0.8 percent, the main advancer among 10 industry groups. Inventec, a supplier to Apple, jumped 6.8 percent while Hon Hai Precision Industry Co. added 1.4 percent in Taipei. LG Innotek Co. advanced 3.5 percent to the highest level since June 19 in Seoul. Apple, maker of the iPhone and iPad, posted third-quarter earnings per share of $7.47, beating the average analyst estimate of $7.30.

The MSCI Emerging Markets gauge has lost 8.4 percent this year and trades at about 10.1 times its 12-month projected earnings. The MSCI World Index of developed nations has gained 13 percent in 2013 and trades at 13.9 times, according to data compiled by Bloomberg.

The rupiah dropped 0.6 percent, extending losses after losing the most in 13 months yesterday as Bank Indonesia allowed a more rapid slide toward levels quoted in the offshore market. India’s rupee led gains, advancing 1.1 percent against the dollar, while the Brazilian real fell 1.6 percent even as the central bank intervened.

China Stocks

The Shanghai Composite Index fell 0.5 percent, dropping for the first time in three days, while the Hang Seng China Enterprises Index (HSCEI) of mainland companies traded in Hong Kong was little changed. PetroChina dropped the most in a month.

The S&P BSE Sensex sank 1 percent after the Reserve Bank of India tightened lenders’ access to cash to support the rupee after the currency slid to a record earlier this month. State Bank of India dropped to the lowest level since Jan. 13, 2012.

To contact Bloomberg News staff for this story: Lyubov Pronina in London at lpronina@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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