Emerging-market stocks declined this week, capping the worst start to a year since 2009, as signs of a Chinese slowdown and worse-than-estimated Russian economic data bolstered concern the global recovery will falter.
The MSCI Emerging Markets Index was little changed at 936.53 today, falling 1.4 percent for the week and 6.6 percent in January. OAO Gazprom drove declines in Russia’s Micex Index, while the ruble approached a five-year low. The Borsa Istanbul 100 Index slid 1.3 percent as Turkey’s trade deficit increased more than expected. Brazil’s Ibovespa (IBOV) erased earlier losses as Itau Unibanco Holding SA led financial companies higher.
Equities joined a global selloff this month after China’s manufacturing contracted, the Federal Reserve pressed on with economic stimulus cuts amid a rout in emerging-market currencies and political unrest in Ukraine escalated. Russia’s economy grew at less than half the previous year’s pace in 2013, missing forecasts as investment declined, data today showed.
“Investors around the world are closely watching the emerging markets right now,” Timothy Ghriskey, who oversees $1.5 billion as the chief investment officer at Solari Group LLC, said by phone from New York. “China is investors’ biggest concern simply because its slowing growth has ripple effects through many emerging markets. Investors are also scared of the slowing level in Russia’s economic growth.”
The iShares MSCI Emerging Markets Index exchange-traded fund added 0.2 percent to $38.19 today. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, advanced 1.8 percent to 28.90.
Brazil’s Ibovespa advanced, paring its monthly decline to 7.5 percent as Itau surged 2.6 percent. Power utility EDP-Energias do Brasil SA gained as energy prices soared because the nation’s dry weather is depleting reservoirs used for hydropower.
Russian shares fell, extending the worst start to a year since 2008, as Gazprom, the nation’s biggest company, sank 1.5 percent. OAO M.video, Russia’s biggest electronics retailer, had the biggest decline on the Micex Index this month. The ruble capped its worst month since May 2012 against Bank Rossii’s target dollar-euro basket.
Ukraine’s hyrvnia slumped, extending its biggest monthly decline in more than four years, and bond yields surged on speculation the nation’s political crisis will worsen. The Borsa Istanbul 100 Index extended this year’s slide to 8.8 percent as Turkiye Garanti Bankasi AS (GARAN) sank.
Chinese markets are closed for the Lunar New Year holiday. The Shanghai Composite Index completed the worst start to a year since 2010 yesterday after the nation’s manufacturing contracted for the first time in six months.
“The consensus is overwhelmingly negative,” John-Paul Smith, a global emerging-market equity strategist at Deutsche Bank AG, said by phone today. “The key is the uncertainty of what’s going to happen in China. We stick to our forecast of a 10 percent drop in EM equities this year, for the time being.’
Indian stocks rose, led by property developers and banks, as the benchmark index ended five days of losses before the release of economic data and earnings reports. Oberoi Realty Ltd. (OBER) had the biggest weekly gain after the Supreme Court overruled a Bombay High Court order that plots of land owned by the company in Mumbai were a ‘‘private forest.” ICICI Bank Ltd. climbed 1.4 percent.
The premium investors demand to own emerging-market debt over U.S. Treasuries rose six basis points, or 0.06 percentage point, to 358 basis points, according to JPMorgan Chase & Co.
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