Emerging Stocks Drop Most in Two Weeks on China Manufacturing

Emerging-market stocks fell the most in two weeks and currencies weakened after a Chinese manufacturing gauge dropped to the lowest level in seven months.

Industrial & Commercial Bank of China Ltd. led a 0.8 percent loss in the Hang Seng China Enterprises Index. Tencent Holdings Ltd. (700), Asia’s largest Internet company by market value, sank 2.5 percent in Hong Kong after Facebook Inc. agreed to buy mobile-messaging start-up WhatsApp Inc. South Korea’s won slid 0.6 percent versus the dollar while Thailand’s baht slumped for a third day amid political unrest. China Petroleum & Chemical Corp. jumped 9.6 percent on a plan to seek private investors.

The MSCI Emerging Markets Index slid 0.8 percent to 951.35 as of 1:54 p.m. in Hong Kong. The preliminary February reading of 48.3 for a Chinese Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics compares with the median estimate of 49.5. A number below 50 indicates contraction. The International Monetary Fund warned of risks to world growth before data today that may show U.S. jobless claims fell.

“We expect capital flight from emerging markets due to persistent currency challenges,” Deven Choksey, managing director at KR Choksey Shares & Securities Pvt., said by phone in Mumbai. “Moderate-to-limited growth outlook for China and the political upheavals in the region will be a drag on stocks.”

Risks of prolonged market turmoil in emerging markets and of deflation in the euro area are threatening the world’s improved economic prospects, IMF staff wrote in a note prepared for central bankers and finance ministers from the Group of 20. The ministers meet this weekend in Sydney.

Stock Valuations

The MSCI Emerging Markets Index has lost 5.1 percent this year and trades at 9.2 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has dropped 0.6 percent in 2014 and is valued at a multiple of 14.7 times.

The Hang Seng China Enterprises Index (HSCEI) lost 0.7 percent, its third day of declines. Industrial & Commercial Bank of China, the nation’s largest lender, slid 2.7 percent.

The data on Chinese manufacturing today adds to concern that the world’s second-biggest economy is at risk of a deeper slowdown. Softening factory output increases pressure on policy makers to support economic expansion that’s forecast to slide to a 24-year low of 7.4 percent in 2014.

China Petroleum, also known as Sinopec, soared 9.6 percent in Hong Kong as it seeks private investors for as much as 30 percent of its oil retail unit. The sale could raise more than $20 billion. The stock’s rally in Shanghai helped boost the Shanghai Composite Index (SHCOMP), which gained 0.7 percent.

Tencent Slides

Nine out of 10 industry groups in the MSCI Emerging Markets Index declined, paced by technology and consumer companies. Tencent, which operates the WeChat messaging service in China, dropped the most since Feb. 4.

Naver Corp., a South Korean web portal operator, tumbled 7.6 percent in Seoul. Facebook, the world’s largest social network, agreed to acquire WhatsApp for as much as $19 billion in cash and stock, seeking to expand its reach among users on mobile devices.

The won slumped the most since Jan. 30, while the Philippine peso and Malaysia’s ringgit lost at least 0.2 percent. The baht weakened 0.1 percent, taking the three-day decline to 1 percent, the biggest since Jan. 6, according to data compiled by Bloomberg. Thailand’s SET Index slumped for a third day, poised for the steepest loss since Feb. 4.

Thailand’s Civil Court ordered the government yesterday not to use force to contain the protests after a violent clash between police and demonstrators on Feb. 18 left five people dead and injured at least 69. The demonstrations are aimed at ousting Prime Minister Yingluck Shinawatra amid claims her government is corrupt.

The S&P BSE Sensex of Indian shares retreated 0.5 percent, snapping a four-day loss, as Tata Steel Ltd. and State Bank of India paced declines.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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

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