Emerging-market stocks dropped for a second day amid concern that Chinese economic growth is slowing. The Hang Seng China Enterprises Index tumbled into a bear market and the yuan declined the most since 2008.
The MSCI Emerging Markets Index retreated 1 percent to 940.70. The H-shares gauge of mainland companies trading in Hong Kong extended its plunge from a Dec. 2 high to 20 percent. The yuan sank to the lowest level in more than a year. The ruble slumped after Standard & Poor’s cut Russia’s credit rating outlook and the U.S. ordered financial sanctions on a wider swath of the nation’s officials. Brazil’s Ibovespa reversed losses as Petroleo Brasileiro SA (PBR) surged 4.9 percent.
Equities fell after Goldman Sachs Group Inc. cut its forecast for China’s growth and solar-cell maker Baoding Tianwei Baobian Electric Co. said its bonds will be halted from trading tomorrow, fueling concern that bad debts will increase. The H-shares joined stock gauges in Brazil and Russia, which entered bear markets last week, on concern the crisis in Ukraine would escalate while the Federal Reserve withdraws stimulus.
“China’s growth outlook is still uncertain,” Alan Gayle, who helps oversee about $50 billion in assets as a senior strategist at RidgeWorth Capital Management, said in a telephone interview from Atlanta. “There’s concern about defaults. As the Fed talks more about tightening in the future, that continues to put pressure on emerging markets.”
Federal Reserve Chair Janet Yellen said yesterday stimulus could end this fall and interest rates could rise six months later. U.S. central bank officials predicted their target interest rate will be 1 percent at the end of 2015 and 2.25 percent a year later, higher than previously forecast.
Brazil’s Ibovespa climbed to a three-week high as Petrobras led gains among state-controlled companies on speculation a poll will show diminished support for President Dilma Rousseff’s re-election. Power utility Centrais Eletricas Brasileiras SA (ELET6), which is also run by the federal government, extended a three-day gain to 9.5 percent.
Russia’s ruble snapped a three-day gain versus the dollar, extending this year’s plunge to 9.1 percent, the most after the Argentine peso among 24 emerging-market currencies tracked by Bloomberg. S&P’s outlook cut came after U.S. President Barack Obama also authorized possible penalties directly targeting the economy.
The Hang Seng China Enterprises Index dropped 1.7 percent. BYD Co. (1211), the Warren Buffett-backed maker of electric cars, tumbled 14 percent today while the CSI 300 Index of mainland-listed shares sank 1.6 percent to a five-year low. The yuan weakened 0.5 percent to 6.2275 per dollar.
The iShares MSCI Emerging Markets Index exchange-traded fund advanced 0.4 percent to $38.74. The premium investors demand to own emerging-market debt over U.S. Treasuries added 0.02 percentage point to 312 basis points, according to JPMorgan Chase & Co.
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