Emerging Stocks Slip From 16-Month High on Stretched Valuations

Emerging-market stocks fell for the first time in eight days amid concern the rally that drove valuations to a three-year high is overdone. South Africa’s rand led currencies lower.

Tencent Holdings Ltd. (700) paced declines for developing-nation technology shares. Russian stocks slid as Brent fell to the lowest since May 9. Hungary’s BUX index dropped as Mol Nyrt., the country’s largest refiner, sank to a five-year low. Indonesia’s rupiah forwards surged the most since Feb. 14 as unofficial counts at polling booths showed Joko Widodo leading Indonesia’s presidential race.

The MSCI Emerging Markets Index lost 0.3 percent to 1,061.60, slipping from a 16-month high. The gauge ended the longest stretch of gains since April that pushed valuations to the most expensive since 2011.

Today’s drop was a bout of profit-taking amid a decline in U.S. stocks, Hertta Alava, head of emerging markets at FIM Asset Management Ltd. in Helsinki, said by e-mail. “Fund flows have been positive lately,” Alava said.

Eight out of 10 industry groups in the developing-nation measure slipped, led by technology and consumer-discretionary stocks. Tencent, Asia’s largest Internet company, dropped 3.3 percent in Hong Kong, its second day of losses. The technology gauge has surged 17 percent this year.

Oil Retreats

The Micex declined for the first time in three days, dropping 0.2 percent as slumping oi prices pared demand for Russian producers. Brent for August settlement fell 66 cents, or 0.6 percent, to $108.28 a barrel.

Brazil’s stock market was closed for a holiday.

The BUX index fell 1.8 percent to a two-month low as Mol declined 3.5 percent.

The PX index in the Czech Republic climbed 1.6 percent, with Erste Group Bank AG advancing 2.2 percent. The Austrian lender slumped 22 percent in the previous three trading days to a one-year low after saying it expects a record loss this year.

Egypt’s benchmark EGX 30 Index rose for a second day, climbing 0.8 percent. Thailand’s SET Index (SET) rose less than 0.1 percent, its 10th day of gains and the longest stretch of advances since August 2010.

The emerging-markets gauge has risen 5.8 percent this year and trades at 11 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 5.1 percent and is valued at a multiple of 15.1 times.

Indonesia Election

In Indonesia, one-month non-deliverable forwards traded offshore strengthened 1.5 percent. Widodo who investors bet will be able to cut red tape, boost investment and stoke growth, had about a five percentage point lead, according to unofficial counts from two survey companies that declared him the winner. His opponent, Prabowo Subianto, disputed those numbers, saying he was winning based on unofficial counts of survey companies used by his team.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong dropped 1.6 percent, the most in two weeks. The Shanghai Composite Index slid 1.2 percent, its steepest loss since June 19. Data today showed China’s producer prices fell in June at the slowest pace in more than two years, while the inflation rate grew less than estimated.

The S&P BSE Sensex Index in Mumbai Indian stocks fell 0.5 percent, extending its 2 percent drop from a record high yesterday, before the government announces its budget tomorrow.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell two basis points to 260, according to JPMorgan Chase & Co. indexes.

To contact the reporters on this story: Zahra Hankir in London at zhankir@bloomberg.net; Choong En Han in Kuala Lumpur at echoong6@bloomberg.net

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

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