Emerging-market stocks fell, extending the worst start to a year on record, on concern the global economic recovery will wane. Lenovo Group Ltd. (992) drove a selloff in technology companies after five analysts downgrades.
The MSCI Emerging Markets Index dropped 1 percent to 917.74, a five-month low. The decline brought this year’s slump to 8.5 percent, the most since at least 1988. Lenovo, the largest maker of personal computers, sank the most in five years and dragged the Hong Kong’s benchmark down 11 percent from its December peak. The FTSE/JSE Africa All Shares Index (JALSH) fell for an eighth day in Johannesburg, the longest slide in a decade. Brazil’s Ibovespa (IBOV) led gains among 94 world stock gauges.
About $2.9 trillion has been erased from equities worldwide this year after manufacturing gauges in the U.S. and China, the world’s biggest economies, signaled a slowdown at a time when the Federal Reserve is cutting stimulus. All 10 groups in the benchmark measure for emerging-market stocks retreated today as a measure of technology shares sank 1.9 percent.
“Emerging markets are very fragile and it doesn’t take much of an economic change to damage them,” Timothy Ghriskey, who oversees $1.5 billion as the chief investment officer at Solari Group LLC, said by phone from New York. “We see bad numbers from emerging economies all over the world.”
The iShares MSCI Emerging Markets Index exchange-traded fund rallied 2 percent to $37.86 after data showed U.S. factory-orders fell less than estimated. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 6.5 percent to 29.13.
The selloff in emerging-market assets that sent the benchmark equity index to the lowest valuation since the 2008 financial crisis may have gone too far, according to UBS AG Chief Executive Officer Sergio Ermotti. Jim O’Neill, the former chairman of Goldman Sachs Asset Management, said the rout in developing nations is creating a buying opportunity.
“We probably are closer to a good opportunity to buy some of these things rather to join in the panic,” O’Neill, who coined the term BRIC for Brazil, Russia, India and China in 2001, said in a Bloomberg Radio interview with Kathleen Hays. “Some places in the emerging world have got some real problems, but that to be described as some kind of emerging-market crisis is frankly kind of ridiculous.”
Brazil’s Ibovespa rose from a six-month low as Itau Unibanco Holding SA (ITUB4), the nation’s largest lender, jumped after posting earnings that exceeded estimates. The country’s swap rates declined from a two-year high as a bigger-than-forecast drop in industrial production added to speculation that the central bank will limit further increases in borrowing costs.
Russia’s benchmark stock gauge extended its worst start to the year since 2008 amid a global equity rout. OAO Mobile TeleSystems surged on plans to boost dividends. The ruble strengthened for the first time in three days on wagers the Russian currency’s slump to a record low was overdone.
Ukraine’s dollar bonds gained for a second day as the opposition formulated plans to resolve the country’s political crisis and western nations discussed an aid deal for Europe’s riskiest sovereign.
The Turkish lira led gains in emerging-market currencies as the central bank cut funding for lenders, raising the weighted average cost of finance for banks to almost 10 percent.
South Africa’s main stock index capped the longest slide since February 2004, dropping 1.1 percent. Harmony Gold Mining Co. and AngloGold Ashanti Ltd. tumbled at least 3.3 percent.
The Hang Seng Index (HSI) declined 2.9 percent in Hong Kong, the steepest drop since July 2012 as it reopened after Lunar New Year holidays. Lenovo, which announced $5 billion of deals last month to bolster its server and smartphone businesses, plunged 16 percent. The world’s biggest maker of personal computers was cut at UBS AG, Morgan Stanley, Jefferies Group LLC, JI-Asia Research Ltd. and Kim Eng Securities Ltd.
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the pace of Chinese economic growth is among the biggest questions in developing nations and greatest risks for financial markets.
“I call China the mystery meat of emerging-market countries,” Gross said during an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. “Nobody knows what’s there and there’s a little bit of bologna, so we’re just going to have to wonder going forward through this year as to the potential problems in China and other emerging markets.”
Most Indian stocks climbed after the benchmark index rebounded from its lowest level in four months as some investors judged the losses excessive. Bharti Airtel Ltd., India’s largest mobile-phone operator, was the biggest gainer on the S&P BSE Sensex. Power generator NTPC Ltd. climbed the most since August. Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, rallied from a four-month low.
Thailand’s baht strengthened by the most in three weeks after national elections passed without major violence after months of political protests. Malaysia’s ringgit strengthened the most this year after some investors judged its recent decline to be excessive.
The premium investors demand to own emerging-market debt over U.S. Treasuries fell nine basis points, or 0.09 percentage point, to 357 basis points, according to JPMorgan Chase & Co.
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