Emerging-market stocks fell, with the benchmark index posting the biggest four-day tumble in 15 months, on concern a real-estate slump in China and Europe’s government debt crisis will slow economic growth.
The MSCI Emerging Markets Index dropped 2.2 percent to 948.54 by 5 p.m. in New York, sending the gauge to a two-month low and extending this week’s retreat to 7 percent, the biggest four-day decline since Feb. 20, 2009.
China’s Shanghai Composite Index sank 4.1 percent after brokerages including China Jianyin Investment Securities Co. said home prices in the world’s third-largest economy may fall 30 percent. Europe’s government bonds slid and Spain’s borrowing costs surged to a 23-month high as central bank policy makers debated more steps to restore investor confidence in the euro.
U.S. stocks tumbled the most in a year, briefly erasing more than $1 trillion in market value as the Dow Jones Industrial Average fell almost 1,000 points, its biggest intraday loss since 1987, before paring the drop.
“The risk of a double-dip has certainly increased now,” Clive McDonnell, head of Asian equity strategy at BNP Paribas SA in Singapore, said in a Bloomberg Television interview. “When risk aversion arises, it’s Asia that gets hit specifically.”
The MSCI gauge of developing-nation stocks in Asia sank 2.4 percent and the measure of equities in east Europe slid 2.7 percent. Kazakhstan’s KASE Index fell 4.4 percent bringing its loss in six days to 9.5 percent and from a Jan. 15 peak to 15 percent. Argentina’s main equity index, the Merval, fell 5.4 percent, the biggest drop worldwide. Siderar SAIC, the country’s biggest steelmaker, dropped 8.6 percent to a two-month low. Brazil’s Bovespa stock index plunged to a three-month low. Vale SA, the world’s biggest iron-ore miner, dropped 2.3 percent as metals price declined.
Russia’s Micex Index slipped 1 percent. It has decreased 11 percent since an April 15 high, surpassing the level that constitutes a so-called correction. Preferred shares of pipeline operator OAO Transneft slumped 5.7 percent. The ruble weakened 1.8 percent against the dollar as prices of oil, the country’s main export earner, declined.
China Stocks Sink
Emerging-market bonds dropped for a third day, losing 1.4 percent, according to JPMorgan Chase & Co.’s EMBI+ Index. The extra yield investors demand to own the securities over Treasuries surged 28 basis points to 3.23 percentage points, the most since Feb. 17, 2009, the EMBI+ gauge showed.
China Vanke Co., the nation’s largest listed developer, fell 4.1 percent and the Shanghai Composite share index closed at a seven-month low.
The country’s home prices may slump as local authorities implement measures to crack down on property speculation, analysts said. Home sales plunged nearly 40 percent by both units and floor space in 15 major cities last week, extending a streak of declines since mid-April, according to Zheshang Securities Co. China on May 2 raised banks’ reserve requirements for the third time this year, adding to last month’s down-payment and interest-rate increases on second mortgages.
A 110 billion-euro ($140 billion) aid package to avoid a default by Greece has failed to prevent bond yields from rising, driving up borrowing costs for countries including Spain and Portugal. Sovereign debt contagion may spread across Europe, affecting the banking systems of countries such as Portugal, Spain and Italy, as well as Greece, Moody’s Investors Service said in a report.
European Central Bank President Jean-Claude Trichet said the ECB’s Governing Council didn’t discuss today whether it should purchase government bonds to cap a rise in yields.
The Polish zloty extended its longest losing streak in more than six months, slumping 2.2 percent to 4.1612 against the euro, wiping out its gains for the year.
Indonesia’s rupiah dropped 1 percent to 9,188 per dollar as overseas investors sold the country’s stocks and bonds.
Finance Minister Sri Mulyani Indrawati’s move to the World Bank as a top adviser to President Robert Zoellick, confirmed yesterday, is raising concern about whether the nation’s economic reforms will continue, said Vishnu Varathan at Forecast Singapore Pte. The Jakarta Composite Index of shares retreated 1.3 percent to the lowest level since March 31.