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Emerging Stocks Fall on Outflow Concern as Rupee Tumbles

Emerging-market stocks tumbled the most in six weeks as Indonesia’s record current-account deficit and Thailand’s recession spurred concern that capital outflows will accelerate. India’s rupee sank to an all-time low.

The MSCI Emerging Markets Index slid 1.4 percent to 944.88. The Jakarta Composite Index dropped by the most since October 2011, while Thailand’s SET Index retreated to a one-month low. India’s S&P BSE Sensex extended a drop from its July 23 high to almost 10 percent and the rupee led losses in 23 of 24 developing-nation currencies tracked by Bloomberg. Brazil’s swap rates climbed as the real touched a level weaker than 2.4 per dollar for the first time in four years.

Indonesia’s current-account shortfall widened to $9.8 billion last quarter, the largest in data compiled by Bloomberg going back to 1989. Thailand cut its 2013 growth forecast as the country entered recession for the first time since the global financial crisis. India’s rupee plunged on speculation a strengthening U.S. economy may prompt the Federal Reserve to pare its $85 billion monthly bond-buying program.

“The emerging markets that are down the most today are those that are most dependent on foreign capital inflows to fund their balance of payments,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP in London, said by e-mail.

All 10 groups in the MSCI Emerging Markets Index fell today as health-care and utility companies had the biggest losses. The broad measure dropped 10 percent this year, compared with a 12 percent surge in the MSCI World Index. The gauge of developing nations is trading at 10 times estimated earnings, below the valuation of developed markets of 13.6.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund slid 1.9 percent at $38.56. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 4 percent to 24.57.

“There’s some concern about policy in the U.S, global demand,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $147 billion, said by phone. “All that has the potential to dampen demand and create some risk in emerging markets.”

Most Brazilian stocks fell as Gafisa SA led homebuilders lower on speculation policy makers may speed up the pace of interest-rate increases to curb inflation, dimming the outlook for companies that sell on credit. The real declined 0.8 percent to the weakest level since March 2009.

The Micex Index (INDEXCF) added 0.2 percent as Bank of America Merrill Lynch raised its recommendation for OAO Gazprom. The Borsa Istanbul National 100 Index sank 2.6 percent, while the lira weakened to a record against the euro.

Indonesia, Thailand

The Jakarta Composite Index of shares has fallen almost 8 percent in two days, and is now the world’s worst performer this quarter. Thai’s SET slumped 3.3 percent today. The S&P BSE Sensex slid 1.6 percent as State Bank of India and ICICI Bank Ltd. tumbled at least 2.6 percent.

China’s stocks rose for the first time in four days as communication shares and rare-earth producers rallied after the government said it will expand the country’s broadband network. Brokerages declined. ZTE Corp. (000063) and Yonyou Software Co. jumped by the 10 percent daily limit.

The premium investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 323 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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