Emerging Stocks Fall as China Concern Offsets Tech Rally

Emerging-market stocks fell for first time in four days as Chinese shares sank amid concern an economic slowdown will hurt corporate earnings, offsetting gains in technology companies.

Brazil’s Ibovespa (IBOV) sank from a six-month high as Cia. Hering led retailers lower after the company was removed from MSCI Inc.’s Brazil index and the industry’s sales fell short of forecasts. The Shanghai Composite Index slid the most since April 28. Tencent Holdings Ltd. surged, leading gains in technology shares as the Internet company’s profit beat estimates.

The MSCI Emerging Markets Index fell 0.3 percent to 1,029.10, with eight of ten industry groups retreating. A measure of information technology shares on the gauge rallied to a record high. Chinese economic data this week showing lower-than-expected expansion in areas including industrial output and retail sales is weighing on stocks amid concern the economic slowdown will crimp emerging-nations’ exports, said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC.

“People have been focused on slowing growth in China for a while now,” Jankovskis, who helps oversee $3.2 billion, said by phone from Lisle, Illinois. “This is another piece of evidence that their economy is slowing.”

Today’s decline trimmed the emerging-market gauge’s gain this year to 2.6 percent. The measure trades 10.7 times earnings estimates for the next 12 months. The MSCI World Index of developed-nation shares has climbed 1.4 percent in 2014 and has a price-to-earnings multiple of 14.2.

Chinese Stocks

The Hang Seng China Enterprises Index (HSCEI) halted a three-day winning streak, dropping 0.2 percent. The Shanghai Composite Index (SHCOMP) declined 1.1 percent.

UBS AG said China’s large-company stocks may fall 20 percent this year as corporate earnings slump and a weak property market hurts economic growth.

The Ibovespa sank 1 percent. Hering tumbled 4 percent. Brazil’s retail sales fell 1.1 percent in March from a year earlier, the national statistics agency said today, more than the 0.3 percent median estimate of economists surveyed by Bloomberg. MRV Engenharia e Participacoes SA and Marcopolo SA were also deleted from the MSCI Brazil index effective the close of trading on May 30.

Tencent, Asia’s largest Internet company, climbed 5.8 percent to a five-week high as stockholders approved a 5-for-1 share split and net income jumped 60 percent. Delta Electronics Inc., which manufactures power supplies, increased for a third day in Taipei, while NCsoft Corp., the developer online games, surged 4.6 percent in Seoul.

Russia Slowdown

The Micex Index fell 0.5 percent in Moscow, extending its drop this year to 8.1 percent. Russia’s first-quarter economic growth slowed to 0.9 percent, according to the Moscow-based Federal Statistics Service, the weakest reading in a year, as the standoff against the U.S. and its allies over Ukraine shrivels up investment.

Egypt’s benchmark EGX30 Index extended gains into a fifth day with a 1 percent advance. Arabian Cement (ARCCO) will start trading next week following the country’s first initial public offering since 2010. Egyptians will vote for a new leader on May 26 with Abdel-Fattah Al-Seesi, the former army chief who led President Mohamed Mursi’s overthrow in July, widely seen as the front-runner.

Dubai’s benchmark stock index, the world’s best-performer this year, slid 2.6 percent today, led by Emaar Properties PJSC (EMAAR), on bets a rally in the run up to its inclusion on MSCI’s emerging-market gauge was excessive.

India Inflation

India’s (SENSEX) rupee strengthened to the highest level since July 26. The nation’s wholesale inflation unexpectedly eased in April, giving the central bank room to keep rates unchanged before a new government takes charge.

Vietnam’s VN Index retreated 1 percent. Anti-China protests escalated in the country as an attack on workers at the site of a Taiwanese steel mill in a central province left one dead and 128 people injured.

The premium investors demand to own emerging-market debt over U.S. Treasuries increased 0.03 percentage point to 284 basis points, according to JPMorgan Chase & Co. indexes.

To contact the reporters on this story: Natasha Doff in London at ndoff@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editors responsible for this story: Daliah Merzaban at dmerzaban@bloomberg.net Richard Richtmyer, Marie-France Han

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.