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Emerging ETF Declines After Fed Minutes as Hungary Slumps

The iShares MSCI Emerging Markets Index exchange-traded fund extended losses after Federal Reserve officials said they might trim stimulus in coming months. Hungary’s shares slid as the nation fined 11 banks.

The developing-nation ETF retreated 1.4 percent to $41.79, while the MSCI Emerging Markets Index dropped 0.5 percent to 1,019.57. The BUX Index led declines among major Eastern European stocks gauges as OTP Bank Nyrt., Hungary’s largest lender, tumbled. Samsung Electronics Co. (005930) and Taiwan Semiconductor Manufacturing Co. drove losses in technology companies. Yields on Poland’s government bonds climbed after Prime Minister Donald Tusk announced changes in his cabinet.

Stocks joined a global slump after minutes from the Fed’s last meeting showed policy makers might reduce their $85 billion in bond purchases “in coming months” as the world’s largest economy improves. The benchmark gauge for shares in developing nations has slid as much as 16 percent since May 22, when the U.S. central bank signaled its asset-buying program could be trimmed if the economy showed sustained improvement.

“Investors are seeing an end to this easy monetary policy,” Ian Hague, founding partner of New York-based Firebird Management LLC, which manages $1.3 billion of assets including Russian stocks, said in a telephone interview from New York today. “Until certainty returns, emerging markets are going to underperform.”

Technology shares in the MSCI Emerging Markets Index fell 1.3 percent as a group. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, advanced 3.3 percent to 24.12.

Hungary, Poland

Hungary’s BUX index slumped as OTP dropped 1.3 percent. The nation fined 11 banks for what it said amounted to illegal collusion two years ago against a government program that imposed costs on lenders by allowing the repayment of foreign-currency loans at below-market rates. Russia’s Micex Index (INDEXCF) fell for the first time in five days, while Turkish stocks rose.

The yield on 10-year securities climbed five basis points, or 0.05 percentage point, to 4.43 percent at 5:29 p.m. in Warsaw, the highest since Oct. 11. Mateusz Szczurek, chief economist for Central and Eastern Europe at ING Groep NV in Warsaw, will replace Finance Minister Jacek Rostowski, Tusk said at a press conference today, adding the nominee’s views on “macroeconomic strategy” are “identical” with his and Rostowski’s.

South Africa

South Africa’s rand advanced the most among 31 major currencies as the inflation rate in the continent’s biggest economy slowed to the lowest since June.

Philippine stocks led declines in Asia as Megaworld Corp. (MEG) tumbled 6.1 percent, pacing losses in property developers. South Korea’s Kospi index snapped a four-day rally as Samsung slumped. India’s S&P BSE Sensex (SENSEX) posted the biggest drop since Nov. 5 as ICICI Bank Ltd. (ICICIBC) dragged a gauge of lenders to the biggest slide in two weeks.

China’s benchmark stock index rose to a one-month high after the central bank elaborated on plans to loosen controls on financial markets. Chinese equities in Hong Kong rallied for a fifth day to erase losses for the year. Haitong Securities (600837) Co. and China Construction Bank Corp. led gains for brokerages and lenders in Shanghai. Air China Ltd. and China Southern Airlines Co. surged after the Shanghai Securities News reported the government may issue airspace-management rules.

Brazil’s stock market is closed for a holiday. The Ibovespa (IBOV) dropped the most in seven weeks yesterday on speculation Latin America’s largest economy will remain stalled, making equity rallies hard to sustain.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell eight basis points, or 0.08 percentage point, to 322 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Zahra Hankir in London at zhankir@bloomberg.net; Halia Pavliva in New York at hpavliva@bloomberg.net

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

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