Emerging-market stocks fell the most in almost a month, led by India and Brazil, as HSBC Holdings Plc (HSBA) said fast-growing developing nations are slowing and amid speculation the Federal Reserve will reduce stimulus measures.
The MSCI Emerging Markets Index slid 1.1 percent to 946.30, the biggest drop since July 8. Tata Power (TPWR) Co., India’s biggest non-state generator, sank the most in nine years after reporting a loss, while OAO Lukoil tumbled 3 percent in Moscow and Petroleo Brasileiro SA paced declines in Sao Paulo. The yuan closed 0.01 percent shy of its 19-year high after the central bank boosted the currency’s reference rate and the government reiterated plans to open up the nation’s capital markets.
Fed Bank of Chicago President Charles Evans, a voting member of the U.S. central bank’s policy committee who has been among the strongest proponents of record monetary accommodation, said today he “would clearly not rule” out a decision to begin dialing back the purchases in September. HSBC, Europe’s biggest bank, reported profit that missed estimates. Chief Executive Officer Stuart Gulliver said China’s market slowed, while Latin American growth eased on weak consumer consumption.
“That could certainly weigh on emerging markets and explain why it’s underperforming so badly,” said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, referring to HSBC’s comments on developing nations. He helps oversee more than $340 billion in assets. “People have sort of realized the Fed is going to start tapering by year-end.”
All 10 groups in the MSCI Emerging Markets Index retreated today as commodity, utility and financial shares had the biggest losses. The measure of developing-nations extended this year’s decline to 10 percent, compared with a 14 percent increase in the MSCI World Index.
The iShares MSCI Emerging Markets Index exchange-traded fund lost 1.3 percent to $38.96. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, jumped 8.2 percent to 22.12.
Brazil’s Ibovespa fell the most in three weeks as Petrobras, as the state-run oil producer is known, slid 2.2 percent. Real estate company BR Properties SA sank after posting second-quarter earnings that missed analysts’ estimates. Brazil’s real rebounded from a four-year low.
The Micex Index (INDEXCF) slid 2 percent in Moscow as oil, Russia’s chief export earner, retreated and investors bet the nation’s central bank may refrain from cutting rates as inflation remains above target. Lukoil slid the most since June 21.
Indian equities posted the biggest drop in six weeks amid speculation the central bank will further tighten money supply and as Tata Power sank the most since May 2004.
China’s stocks rose for a sixth day, the longest stretch of gains in four months, after automakers rallied on improving earnings and Shenyin & Wanguo Securities Co. recommended power producers on valuations.
The premium investors demand to own emerging-market debt over U.S. Treasuries slid 0.01 percentage point to 322 basis points, according to JPMorgan Chase & Co.
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