Emerging Stocks Drop Most Since May on Tech Earnings, Argentina

Emerging-market stocks fell the most since March as Samsung Electronics Co. (005930)’s lower-than-forecast profit pushed technology shares lower. Argentine equities and government bonds sank after the nation defaulted on its debt.

Samsung, the world’s biggest smartphone maker, sank 3.7 percent in Seoul. The Borsa Istanbul 100 Index slid 2.5 percent, while Hungary’s BUX Index retreated 1.7 percent, led by OTP Bank Plc. Argentina’s dollar bonds due 2033 ended a two-day gain and the Merval index fell the most in the world after the country failed to pay interest on $29 billion of debt. Brazil’s Ibovespa dropped the most since April.

The MSCI Emerging Markets Index slid 1.3 percent to 1,065.22. The measure posted a 1.4 percent gain in July, its sixth straight monthly increase. The technology gauge fell 2.5 percent today, the most in a year.

“It’s a day of consolidation for EM, which has been outperforming for the past few days,” Michael Wang, a markets strategist in London at Amiya Capital LLP, said by e-mail.

The emerging-markets gauge has advanced 6.2 percent this year and trades at 11.1 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index is up 3.2 percent in the period and is valued at a multiple of 14.8.

All 10 industry groups in the MSCI Emerging Markets Index dropped, led by technology shares. Samsung slid the most since Jan. 2. Second-quarter net income, excluding minority interests, fell 18 percent. The Kospi Index lost 0.3 percent. Shares in Istanbul posted the biggest drop since June 11.

Hungary Stocks

Hungary’s benchmark stock index fell to the lowest level since May 5. OTP Bank sank 3.2 percent after news website VG cited chief executive officer Sandor Csanyi as saying Hungarian lenders face the risk of losing one-third of their capital on refunds to household borrowers related to the use of exchange-rate margins and unilateral interest-rates.

Gedeon Richter Nyrt. plunged 2 percent after sales prospects at the Hungarian drugmaker deteriorated as sanctions were ramped up against Russia.

The Micex Index slipped 0.2 percent in Moscow. Assets of oligarchs Arkady Rotenberg and Yury Kovalchuk, among others, were frozen by the EU in its effort to pressure President Vladimir Putin to stop supporting rebels in eastern Ukraine.

The ruble depreciated 0.2 percent versus the dollar.

Argentine Default

Argentine notes due in 2033 dropped 6.82 cents to 88.75 cents on the dollar. The country missed a deadline yesterday to pay $539 million in interest after two full days of negotiations in New York failed to produce an accord with creditors from its last default in 2001.

A U.S. judge ruled that the payment couldn’t be made unless those investors, a group of hedge funds led by Elliott Management Corp., got the $1.5 billion they claimed.

Buenos Aires-based newspaper Ambito reported today that banks including Citigroup Inc. are in talks to buy defaulted bonds from holders including Elliott Management.

The Merval index plunged 6.6 percent.

The Ibovespa fell 1.8 percent in Sao Paulo. Brewer Ambev SA slumped 4.5 percent after posting quarterly earnings that trailed analysts’ estimates.

India’s rupee slid 0.8 percent on concern capital inflows to emerging markets will slow as the Federal Reserve cuts stimulus. U.S. policy makers tapered monthly bond buying to $25 billion in their sixth consecutive $10 billion cut, staying on pace to end the purchase program in October.

Chinese Stocks

The premium investors demand to own emerging-market debt over U.S. Treasuries increased seven basis points to 265, JPMorgan Chase & Co. indexes show.

The Shanghai Composite Index (SHCOMP) rose 0.9 percent, extending gains this month to 7.5 percent, the steepest increase since December 2012, amid optimism government stimulus will boost economic growth.

The Hang Seng China Enterprises Index (HSCEI) of mainland shares listed in Hong Kong added 0.1 percent today. It jumped 7.7 percent in July, the most since January 2012. Vietnam’s VN Index rose 1.1 percent and shares in Dubai rallied 2 percent.

(A previous version of this story was corrected to show that Ambito reported that holdout creditors were in talks with banks.)

To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net; Natasha Doff in London at ndoff@bloomberg.net

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

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