Emerging-Market ETF Declines as Fed Minutes Stoke Rate Concern

The iShares MSCI Emerging Markets exchange-traded fund fell as Federal Reserve minutes stoked concern that policy makers will raise U.S. interest rates sooner than anticipated, prompting investors to shift money out of developing nations’ assets.

The ETF declined 0.2 percent to $45.06. The MSCI Emerging Markets Index fell less than 0.1 percent to 1,084.02, halting a seven-day rally. The FTSE/JSE Africa Banks Index in Johannesburg declined to the lowest in more than a month after Moody’s Investors Service cut South Africa’s biggest lenders’ local-currency debt ratings. Turkish equities decreased 0.5 percent, paced by a real-estate investment trust.

Minutes from the Fed’s July meeting said many policy makers noted that “it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated.” Developing-country stocks fell after the comments were released amid concern higher interest rates will lure money to the U.S. from emerging markets, said Paul Christopher, the chief international strategist at Wells Fargo Advisors.

“The initial reaction will be positive for the dollar and slightly negative for emerging markets,” Christopher, who helps manage $1.4 trillion, said by phone from St. Louis.

Turkey’s lira dropped 1.1 percent. A Bloomberg gauge tracking 20 emerging-market currencies fell 0.5 percent to a two-week low.

The Ibovespa (IBOV) gained for a fifth day, advancing 0.7 percent after the central bank acted to boost credit, easing concern that a slowdown in Latin America’s largest economy will deepen.

African Banks

The FTSE/JSE Africa Banks Index dropped 1.4 percent. The local-currency deposit ratings of Standard, FirstRand Ltd., Nedbank Group Ltd. and Absa Bank Ltd., a unit of Barclays Plc, were cut, Moody’s said yesterday in a statement.

The South African Reserve Bank placed African Bank Investments Ltd., an unsecured lender, into administration on Aug. 10 after it reported a record loss and said it needed at least 8.5 billion rand ($792 million) of capital.

Massmart Holdings Ltd. (MSM), South Africa’s biggest food and goods wholesaler, tumbled 8.6 percent after saying first-half earnings dropped.

Turkish stocks fell for the first time in three days. Real estate investment trust Saf Gayrimenkul Yatirim Ortakligi AS plunged 6.8 percent after second-quarter net income decreased to 807 million liras ($369 million) from 1.24 million in the same period last year.

Russia, Ukraine

Russia’s Micex Index added 0.7 percent in the ninth day of advances, the longest stretch of gains since April 2010.

Ukraine’s armed forces said they continue to push back separatists in fighting in the country’s east ahead of a possible face-to-face meeting of the Russian and Ukrainian leaders next week. The UX Index rose 0.5 percent in Kiev.

Six out of 10 industry groups in the emerging-markets measure retreated, led by consumer-staples and phone companies.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong slipped 0.4 percent, while the Shanghai Composite Index (SHCOMP) retreated 0.2 percent before a preliminary manufacturing report tomorrow. Indian shares sank 0.4 percent after a six-day rally.

The premium investors demand to own developing-country debt over U.S. Treasuries declined three basis points to 276, according to JPMorgan Chase & Co. indexes.

To contact the reporters on this story: Natasha Doff in London at ndoff@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.