Emerging-Market Stocks Fall From 13-Month High as Turkey Slumps

Emerging-market stocks fell from a 13-month high as China Mobile Ltd. paced a drop for phone companies and Turkish equities slumped the most in world. The rand slid as the World Bank cut South Africa’s growth forecast.

China Mobile sank the most in seven weeks. OTP Bank Nyrt. sank to a one-month low before a Hungarian court meets next week on foreign-exchange loans. Turkish stocks slid on reports militants from an al-Qaeda group took an unspecified number of hostages after entering the nation’s consulate in Iraq’s second-largest city. Iraqi bonds tumbled for a second day. The Ibovespa gained for a fourth day in Sao Paulo.

The MSCI Emerging Markets Index (DFMGI) lost 0.1 percent to 1,056.04 after a four-day rally drove valuations to the most expensive level since April 2011. The World Bank cut its global growth forecast to 2.8 percent, citing weaker outlooks for the U.S., Russia and China, while calling on developing nations to strengthen their economies before the Federal Reserve raises interest rates.

“We will see a bumpy ride for emerging markets over the next six to 12 months as markets mull the various competing forces,” Neil Shearing, chief emerging-markets economist at Capital Economics, said by phone from London.

The developing-nation gauge has climbed 5.3 percent this year and trades at 11 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has risen 4.2 percent in the period and is valued at a multiple of 15.1.

Hungary Slumps

In the report, the World Bank warned emerging markets that the next bout of financial unrest may catch them off guard, recommending smaller budget deficits, higher interest rates and measures to boost productivity.

Eight of 10 industry groups in the emerging-markets stock gauge fell, as the measure of telecommunications companies slid for the first time in five days. China Mobile (941), the world’s largest mobile-phone company by subscribers, dropped 2.1 percent in Hong Kong, the most since April 23.

Hungary’s BUX Index slumped 0.3 percent and the forint declined for a third day as the inflation rate for May stayed at minus 0.1 percent, providing room for the central bank’s to further cut interest rates. OTP lost 2.5 percent, the most on the nation’s benchmark gauge.

The Borsa Istanbul 100 Index fell 3.2 percent, its first decline in five days. The militants took an unspecified number of hostages at the Turkish consulate in Mosul, Haberturk news channel and Yeni Safak newspaper said. Enka Insaat ve Sanayi AS, a Turkish contractor with operations in Iraq, slumped 5.5 percent, the most since March 3.

Iraqi Bonds

Iraqi government bonds fell for a second day, with the yield on January 2028 debt climbing 39 basis points to 6.90 percent. Tribal gunmen allied to al-Qaeda are close to capturing Baiji, north of Baghdad and home to Iraq’s biggest refinery, Al-Jazeera television reported.

The DFM General Index dropped 0.6 percent in Dubai, taking this week’s loss to 8.5 percent. Arabtec, the biggest publicly traded builder in the United Arab Emirates, slumped 7.8 percent amid speculation the company’s second-biggest investor is selling shares.

The Ibovespa gained 0.9 percent as Brazilian state-run companies including lender Banco do Brasil SA and oil producer Petroleo Brasileiro SA rose amid speculation President Dilma Rousseff will lose her bid for re-election.

The Micex Index rose 0.7 percent in Moscow. Russia gave Ukraine an extra six days to begin payments in a gas-supply deal with the European Union as the parties prepare to resume talks today in Brussels.

The rand depreciated 0.5 percent against the dollar after the World Bank cut South Africa’s economic growth forecast to 2 percent from a 2.7 percent estimate in January.

Technology Stocks

The premium investors demand to own emerging-market debt over U.S. Treasuries rose three basis points to 257, according to JPMorgan Chase & Co. indexes.

A measure of emerging-market technology shares climbed for a second day to a record. Tencent Holdings Ltd. (700), Asia’s largest Internet company, added 2.6 percent in Hong Kong after SocGen-Ji Asia raised it to buy from neutral. The S&P BSE Sensex Index decreased 0.4 percent in Mumbai, ending a four-day rally. Infosys Ltd., India’s second-largest software services exporter, increased 3.8 percent.

The Shanghai Composite Index (SHCOMP) rose 0.1 percent as utilities climbed on speculation the government is planning to announce measures to combat water pollution, overshadowing MSCI Inc.’s decision to exclude local shares from global gauges.

South Korea’s KOSPI Index rose 0.1 percent and Taiwan’s TWSE Index added less than 0.1 percent. China’s mainland-traded shares won’t be included in MSCI Inc.’s global indexes, while South Korea and Taiwan were removed from consideration for an upgrade to developed market status.

To contact the reporters on this story: Natasha Doff in London at ndoff@bloomberg.net; Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ash Kumar, Richard Richtmyer

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