Emerging Stocks Trim Best Weekly Gain Since June on China Slump

Emerging-market stocks fell for a second day, paring the biggest weekly advance since June. Philippine and Chinese shares led declines.

Manila Water Co. (MWC) plunged 14 percent and Metro Pacific Investments Corp. retreated to an eight-month low after a Philippine regulator ordered them to cut rates. Yanzhou Coal Mining Co. (YZC) sank 5.3 percent in Hong Kong on concern about weaker demand. Indonesia’s rupiah slid 0.8 percent against the dollar and currencies in Malaysia and India lost at least 0.4 percent.

The MSCI Emerging Markets Index dropped 0.6 percent to 984.25 as of 1:34 p.m. in Hong Kong, extending declines from a three-month high. The gauge rallied 3 percent this week as prospects for an imminent U.S. strike on Syria eased and China’s economy improved. The largest developing nations for the first time have the worst market opportunities as optimism for stronger growth shifts to the U.S. and Europe, a Bloomberg Global Poll showed. The Federal Reserve meets next week to decide on cuts to monetary stimulus.

“Investors are taking profits after the rally,” Giang Trung Kien, head of research at FPT Securities Co., said in Hanoi. “Investors are now waiting for a clearer signal from the Fed on stimulus tapering.”

Fed policy makers will resume a debate on when to pare $85 billion in monthly bond purchases at their Sept. 17-18 meeting. The central bank is likely to cut asset purchases to $75 billion this month, according to a Bloomberg survey of 34 economists.

BRIC Outlook

Indian markets were judged to have the worst outlook, followed by Brazil, Russia and China, a worldwide poll of investors, analysts and traders who are Bloomberg subscribers showed this week. The number of respondents who see the European Union as one of the two best opportunities rose to 34 percent, its best showing dating to 2009, with the U.S. at 51 percent.

Capital flows into emerging market stocks are showing signs of reversing, even with cheap valuations, as investors focus on brighter growth prospects and lower volatility in Europe, U.S. and Japan, Dwyfor Evans, a Hong Kong-based macro strategist at State Street Global Markets, said in an interview yesterday.

Eight out of 10 industry groups in MSCI’s emerging-markets index dropped, led by material and industrial companies. The broad measure has lost 6.6 percent this year, compared with a 14 percent increase in the MSCI World Index. The developing-nation index trades at 10.5 times projected 12-month earnings, trailing the MSCI World’s 13.8 times, data compiled by Bloomberg show.

Manila Water

Manila Water tumbled the most since Jan. 16, 2009, the biggest drag on the Philippine Stock Exchange Index, which lost 0.9 percent. Metro Pacific, which owns Maynilad Water Services Inc., declined 4.9 percent.

Manila Water and Maynilad Water’s separate petitions for rate increases were rejected by the Metropolitan Waterworks & Sewerage System as they were both ordered yesterday to cut their basic charges. JPMorgan Chase & Co. cut its rating on Manila Water yesterday to neutral from overweight.

The Hang Seng China Enterprises Index (HSCEI) of mainland stocks traded in Hong Kong sank 1.5 percent, paring a second weekly gain. Yanzhou, China’s fourth-biggest coal producer, dropped the most since July 30.

China aims to cut the share of coal in overall energy consumption to below 65 percent by 2017 and reduce output capacity of iron and steel by 15 million tons each in 2015, the cabinet said in a statement yesterday.

Shipping Downgrade

China’s Shanghai Composite Index slid 1.1 percent, led by shippers and banks, after UBS AG downgraded China Shipping Development Co. and investors speculated a recent rally on the Shanghai free-trade zone’s prospects was overdone.

The Chinese gauge gained 4.3 percent this week, the most since February. Trading volumes for the measure were 42 percent above the 30-day average, data compiled by Bloomberg show.

Asian currencies headed for their best week in two months, led by India’s rupee. The Bloomberg-JPMorgan Asia Dollar Index rose 0.5 percent this week, the most since the period ended July 12. The rupiah dropped for a fifth week.

The Jakarta Composite Index (JCI) and Thailand’s SET Index each rose 0.2 percent. South Korea’s Kospi index dropped 0.5 percent. The FTSE Bursa Malaysia KLCI Index fell 0.3 percent, with trading volumes 42 percent below the 30-day average.

To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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