Emerging-Market Stocks Slide With Currencies on Ukraine Tension

Emerging-market stocks fell to a five-week low and currencies in developing Europe slid as Poland warned that Russia may be preparing to invade Ukraine. OAO Sberbank sank to the lowest since 2011.

Sberbank, Russia’s biggest lender which came under European Union sanctions last week, dropped 3.6 percent in Moscow. The ruble weakened 0.4 percent against the dollar, while Poland’s zloty fell 0.3 percent versus the euro. African Bank Investments Ltd. sank 61 percent in Johannesburg as its chief executive officer quit. Brazil’s Ibovespa gained as oil producer Petroleo Brasileiro SA rose amid speculation a potential change in government will reduce intervention in state-owned companies.

The MSCI Emerging Markets Index retreated 0.6 percent to 1,057.20, the lowest since July 1. The risk of Russia invading Ukraine has intensified in the “last dozen hours or so” after President Vladimir Putin increased the number of troops on his country’s western border, Polish Prime Minister Donald Tusk told reporters today.

News of the Russian troop buildup “adds to the sense that the crisis with Ukraine is ongoing and could escalate,” William Jackson, an emerging-market economist at Capital Economics Ltd. in London, said by phone. “Emerging Europe currencies have tended to be hit harder than other emerging markets when tensions between Russia and Ukraine have escalated due to general risk aversion in the region.”

The measure for developing stocks has risen 5.5 percent this year and trades at 11 times 12-month projected earnings, compared with 10.4 on Jan. 1, data compiled by Bloomberg show. The MSCI World Index has gained 2 percent in 2014 and is valued at a multiple of 14.6.

Deleting Shares

The Micex Index fell 1.7 percent in Moscow to the lowest since May 6. MSCI Inc. is discussing deleting Sberbank’s shares from its MSCI Russia index, in addition to a review of VTB Bank announced earlier, after the European Union announced new sanctions, the index provider said in an e-mailed statement. The ruble headed for the lowest level since March 21 versus the dollar.

Hungary’s BUX Index tumbled 1.7 percent in its third day of declines as Magyar Telekom lost 3.7 percent. Majority owner Deutsche Telekom AG’s plans to sell a U.S. mobile unit to Sprint Corp. failed, a person familiar with the matter said.

“Some market players had expected Deutsche Telekom to launch a bid for Magyar Telekom backed by funds from the U.S. deal,” Akos Kuti, a Budapest-based analyst at Equilor Befektetesi Zrt., said by e-mail.

Turkish Elections

African Bank Investments, South Africa’s largest provider of unsecured loans, plummeted the most on record. CEO and founder Leon Kirkinis stepped down after 23 years with the bank, it said in a statement. The lender will seek a potential capital increase following stock sale in December.

Equities in Turkey (XU100) slid 1.5 percent to the lowest level since July 11. The lira dropped 0.3 percent versus the dollar.

A victory for Prime Minister Recep Tayyip Erdogan as the first directly elected president in Turkey’s history on Aug. 10 would allow him to control the National Security Council and decide on the use of military power while keeping a grip on the government run by his party.

Erdogan’s “declared intention to consolidate the presidential power could continue” the country’s drift toward authoritarianism, Amy Yuan Zhuang, a senior analyst at Nordea Markets in Copenhagen, wrote in an e-mailed note.

Samsung Slumps

The Ibovespa gained 0.5 percent in Sao Paulo. Petroleo Brasileiro rose 3.1 percent amid speculation Brazilian President Dilma Rousseff will lose her October re-election bid. An Ibope election poll commissioned by Globo TV may be released tomorrow, according to the electoral court website.

Dubai’s benchmark gauge, the world’s best performer in dollar terms in 2014, lost 2.4 percent, the most since July 20.

Eight of 10 industry groups in the emerging-markets gauge retreated, led by telecommunications and consumer discretionary shares. Samsung Electronics Co. dropped 1.2 percent in Seoul.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong, which entered a bull market last week, fell 0.3 percent, extending yesterday’s 0.7 percent loss. Great Wall Motor Co. (2333) decreased 1.8 percent.

The Shanghai Composite Index (SHCOMP) slipped 0.1 percent, paring a rebound from this year’s low to 11 percent. The measure will probably end its rally within days and fall about 10 percent, according to Tom DeMark, the developer of market-timing indicators.

The Jakarta Composite Index (JCI) decreased 1 percent. Indonesia’s Constitutional Court began hearing on legal challenges from former general Prabowo Subianto who demanded the judge to declare him winner due to alleged vote fraud by President-elect Joko Widodo.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose one basis points to 288, JPMorgan Chase & Co. indexes show.

To contact the reporters on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net; Priyanka Sharma in London at psharma142@bloomberg.net

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

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