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Emerging Stocks Decline After Fed Minutes as Real Tumbles

Emerging-market stocks dropped for a fifth day after Federal Reserve’s minutes showed officials support Chairman Ben S. Bernanke’s plan for trimming stimulus. Brazil’s real sank to the lowest level since December 2008.

The MSCI Emerging Markets Index retreated 0.9 percent to 924.19. The Borsa Istanbul National 100 Index declined to the lowest level since October after Turkey’s central bank kept its benchmark unchanged. Brazil’s Ibovespa fell a second day, erasing an earlier advance of as much as 1.3 percent, while the real slid 2.5 percent, pacing losses among 19 of the 24 developing-nation currencies tracked by Bloomberg.

Fed officials were “broadly comfortable” with the plan to start reducing bond buying later this year if the American economy improves, with a few saying tapering might be needed soon, minutes of their July meeting show. The benchmark measure for emerging markets has plunged about 12 percent since May 22, when the Fed signaled its asset-buying program could be trimmed if the economy showed a sustained recovery.

“There was still a glimmer of hope tapering would start later; that’s probably gone now,” Sameer Samana, the St. Louis-based international strategist at Wells Fargo Advisors LLC, said by phone. His firm oversees about $1.3 trillion. “If they weren’t going to start tapering in September, they would probably have said something in these minutes.”

All 10 groups in the MSCI Emerging Markets Index fell today as consumer and health-care companies had the biggest decline. The broad measure dropped 12 percent this year, compared with a 11 percent surge in the MSCI World Index. The gauge of developing nations is trading at 9.8 times estimated earnings, below the valuation of developed markets of 13.5.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund fell 2.3 percent at $37.59. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, surged 6.4 percent to 26.02.

Brazil’s Ibovespa (IBOV) extended a two-day drop to 2.3 percent, led by meatpacker JBS SA. The real sank 17 percent in the past three months, the most among emerging-market dollar counterparts tracked by Bloomberg.

Russian stocks declined for a second day as a drop in the price of oil offset gains by the country’s largest wireless carrier. The Borsa Istanbul National 100 Index slid 3.5 percent, led by Turkiye Garanti Bankasi AS. (GARAN)

Rupee Weakens

The rupee weakened to 64.0450 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It touched an all-time low of 64.55 earlier. The currency’s slump caused the benchmark stock index to erase gains of as much as 1.8 percent. The Sensex (SENSEX) dropped 1.9 percent to the lowest close since Sept. 11.

Most Chinese stocks rose, led by energy and technology companies. Everbright Securities Co. extended losses after its head of proprietary trading was suspended following a trading error last week. China Oilfield Services Ltd. (2883) climbed to the highest level in six months after its chief financial officer said the company sees strong growth in deep water drilling.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell 0.03 percentage point to 337 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@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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