Emerging-Market Stocks Post Biggest Weekly Decline Since March

Aug. 1 (Bloomberg) -- Michael Spence, professor at NYU Stern School of Business, and Josh Rosner, managing director at Graham Fisher and Company, discuss yesterday’s market selloff and the global risks that brought us to this point. They speak on “Bloomberg Surveillance.”

Emerging-market stocks posted their biggest weekly loss since March as disappointing earnings in Asia and Argentina’s bond default reduced investor demand for riskier assets.

The MSCI Emerging Markets Index fell 0.7 percent to 1,058.81, extending declines in the past five days to 1.9 percent. Samsung Electronics Co. (005930) posted its sharpest two-day drop since August 2012 in Seoul after UBS AG cut its rating. OAO Sberbank tumbled to a three-month low as the Micex Index (INDEXCF) dropped for a second day after the European Union imposed sanctions on Russia’s biggest lenders.

Lower-than-estimated earnings at Samsung, continued hostilities between Russia and Ukraine and a default by Argentina spurred bets that the developing-market gauge’s gain this year was overdone. It had surged as much as 7.8 percent this year as China’s economy accelerated and concern eased that Federal Reserve stimulus cuts will spur capital outflows.

“New sanctions on the Russian economy have contributed to the softness in Russian equities,” Neil Shearing, an emerging-markets economist at Capital Economics Ltd. in London, said by phone. “We could see further downside for EM equities as investors start to pay attention to tighter monetary policy in the U.S.”

Data today showed employers in the U.S. added more than 200,000 jobs for a sixth month in July, the longest such period since 1997.

U.S. Jobs

The 209,000 advance followed a 298,000 gain in June that was stronger than previously reported, figures from the Labor Department showed in Washington.

The emerging-markets gauge has risen 5.6 percent this year and trades at 11 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 2.7 percent and is valued at a multiple of 14.7.

Eight of 10 industry groups in the developing-nation measure fell today, led by technology shares. Samsung, the world’s largest smartphone maker, sank 3.8 percent, extending yesterday’s 3.7 percent retreat after reporting second-quarter profit that missed estimates. UBS cut the stock’s rating to neutral to reflect weak earnings prospects.

The Micex Index decreased 0.4 percent as Sberbank retreated 1.7 percent. The EU added Sberbank, OAO VTB Bank and OAO Gazprombank to its list of institutions sanctioned over President Vladimir Putin’s stance on Ukraine. The sanctions, which follow similar U.S. measures on July 16, restrict the lenders from selling bonds or shares within the EU.

Argentina Default

The Ibovespa rose 0.1 percent in Sao Paulo, paring its weekly loss to 3.3 percent, the most since August 2013. The FTSE/JSE Africa All Share Index decreased 0.9 percent in Johannesburg as data showed the July Purchasing Managers Index fell to 45.9 from 46.6 in June.

The PX Index dropped 0.6 percent in Prague, led by Erste Group Bank AG. Austria’s largest bank reported the biggest quarterly loss in almost three years after it wrote off Romanian assets and abided by new rules on loan fees in Hungary.

Argentine dollar bonds sank for a second day following a default declaration by Standard & Poor’s. The International Swaps & Derivatives Association’s determinations committee ruled that the failure to pay interest will trigger $1 billion of credit-default swaps.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong dropped 1.3 percent, paced by declines in Industrial and Commercial Bank of China Ltd. The Shanghai Composite Index lost 0.7 percent as a global selloff overshadowed data that showed the nation’s manufacturing grew last month at the fastest pace in more than two years.

The premium investors demand to own emerging-market debt over U.S. Treasuries increased nine basis points to 276, JPMorgan Chase & Co. indexes show.

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

To contact the editors responsible for this story: Daliah Merzaban at dmerzaban@bloomberg.net Zahra Hankir, Richard Richtmyer

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