Emerging Stocks Decline as China Shares Sink on Growth Concern

Emerging-market stocks declined for the first time in three days as Chinese shares fell on concern government moves to spur the economy may fail to revive growth in the world’s second-largest economy.

The Shanghai Composite Index retreated for a fourth day. Qatari equities decreased to a two-week low on concern the nation will lose the right to host the 2022 soccer World Cup. The Ibovespa declined as Brazilian commodity exporters dropped. The Micex Index rose for a third day and the ruble ended a seven-day drop as investors bet Russian President Vladimir Putin’s meetings with European leaders will lead to de-escalation of Ukraine tension.

The MSCI Emerging Markets Index lost 0.5 percent to 1,031.19. Chinese stocks posted the longest streak of losses since April 28 as falling home prices overshadowed gains in manufacturing indexes and government plans to cut reserve requirements for some lenders.

“China is the main concern,” Michael Wang, an emerging-markets strategist in London at Amiya Capital LLP, said in a phone interview. Investors are concerned “credit into the property sector is not improving,” he said.

The developing-nation gauge has gained 2.8 percent this year and trades at 10.8 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has risen 3.4 percent in the period and is valued at a multiple of 15.

U.S. Payrolls

Energy and financial stocks dropped the most on the developing-nation index today. Investors are awaiting U.S. economic data on June 6 for signals as to the possible pace of Federal Reserve stimulus cuts, after a private jobs report showed companies added fewer workers than forecast last month.

The Ibovespa declined 0.4 percent. State-controlled oil producer Petroleo Brasileiro SA sank 1.8 percent. China is Brazil’s biggest trading partner.

Russia’s ruble rose from the weakest level in almost a month, appreciating 0.1 percent against the dollar. The Micex gained 0.2 percent.

Group of Seven leaders meet in Brussels starting today and won’t decide on further steps to sanction Russia during the talks, according to a German official speaking on condition of anonymity. Russian assets have rebounded to levels seen before Putin’s incursion into Crimea as the prospect of tougher sanctions from the U.S. and the EU fades.

Qatar’s benchmark QE Index slid 0.6 percent to the lowest level since May 22. Industries Qatar QSC, the country’s biggest petrochemicals company, declined 1.6 percent.

Qatari stocks, among the world’s best performers this year, have dropped in the past three days after Britain’s Sunday Times reported that payments were made to soccer officials in return for allowing the Arab country to host the tournament.

‘Allegation Noise’

Rashid al Mansoori, chief executive officer of the Qatar Exchange, said in an interview today the nation won the World Cup 2022 bid with “credibility” and corruption allegations were merely “noise.”

The premium investors demand to own emerging-market debt over U.S. Treasuries increased three basis points to 271, according to JPMorgan Chase & Co. indexes.

The Shanghai Composite Index decreased 0.7 percent. The gauge is trading at its cheapest level relative to the MSCI Emerging Markets Index on record, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index (HSCEI) of mainland shares traded in Hong Kong fell 0.5 percent, dropping from yesterday’s eight-week high.

Chinese authorities are contending with a property slump that threatens growth while they try to sustain efforts to limit shadow banking, pollution and corruption. Chinese President Xi Jinping said the nation needs to adapt to a “new normal” in the pace of expansion.

HTC Corp. (2498) slumped 4.3 percent to the lowest since March 10 in Taipei after the Taiwanese smartphone maker’s sales decreased in May. Indonesia’s rupiah fell to the lowest level since Feb. 13 on concern a deteriorating trade balance will spur capital outflows from the nation’s financial markets.

To contact the reporter on this story: Lyubov Pronina in London at lpronina@bloomberg.net

To contact the editors responsible for this story: Stephen Kirkland at skirkland@bloomberg.net Zahra Hankir, Richard Richtmyer

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