Emerging-market stocks tumbled the most in eight months, currencies sank and borrowing costs rose as growing concerns of a nuclear disaster in Japan and conflict in the Middle East spurred investors to sell riskier assets.
The MSCI Emerging Markets Index declined 2.2 percent to 1,092.65, the biggest drop since June 29. The extra yield on emerging-market debt over U.S. Treasuries jumped 7 basis points to 2.74 percentage points, JPMorgan Chase & Co.’s EMBI+ Index showed. Bahrain’s credit risk soared to a 20-month high as Saudi Arabian troops entered the country.
The MSCI index extended this year’s loss to 5.1 percent after Japanese Prime Minister Naoto Kan said danger of further radiation leaks was rising at a crippled nuclear facility 135 miles (220 kilometers) north of Tokyo. South Korea’s Kospi Index sank the most in four months, while shares in Taiwan posted the biggest drop since February 2010. Brazil’s Bovespa fell 0.2 percent. South Africa’s currency tumbled 2.1 percent, the most in emerging markets, after Societe Generale SA said Japanese investors may sell rand-denominated debt to raise cash following the March 11 tsunami that destroyed coastal towns.
“Markets are getting very nervous over what’s happening in Japan, people are being risk averse and panicky,” said Raymond Tang, who oversees $6.4 billion as chief investment officer at CIMB-Principal Asset Management Bhd. in Kuala Lumpur.
Benchmark equity indexes retreated in all 15 major emerging markets tracked by Bloomberg that were open for trading today, with indexes in South Korea, Taiwan and South Africa tumbling more than 2 percent. Saudi Arabia’s Tadawul All Share Index retreated 3.5 percent, the most in two weeks.
Japan’s Nikkei-225 Stock Average posted its biggest two-day plunge since the global stock-market crash of October 1987. Tokyo Electric Power Co.’s stricken nuclear power plant was today rocked by two further explosions and a fire as workers struggled to avert the risk of a meltdown.
The Bank of Japan injected 8 trillion yen ($98.8 billion) into money markets today, adding to yesterday’s record cash injection, to secure the nation’s financial stability following the March 11 quake -- updated to a magnitude of 9, from 8.9, by the U.S. Geological Survey.
“Investors are worried about the situation in Japan as the blast at the nuclear plant makes it a regional risk,” said Zhou Xi, a strategist at Bohai Securities Co. “It’s not about the earthquake but more about radiation leakage concerns, which will drag down the economy in Japan and even the whole of Asia.”
The MSCI Emerging Markets Information Technology Index plunged 3.8 percent, the biggest slide since May.
South Korea’s Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, slid 4.7 percent. In addition to a possible drop in demand from Japanese electronics makers, supplies of semiconductor components may be disrupted after the earthquake, Mirae Asset Securities said.
Japanese companies including Toshiba Corp., Sony Corp., Panasonic Corp. and Elpida Memory Inc. supply 20 percent of the world’s technology products, including 44 percent of audio-visual equipment, 40 percent of electronic components and 19 percent of semiconductors, CLSA Asia-Pacific Markets estimates. Plant closures since Tokyo Electric requested companies to cut electricity consumption to ease shortages include two at Toshiba and eight each at Sony and Canon Inc.
Commodities producers fell on concern demand for energy and raw materials will shrink after Japan’s biggest earthquake and nuclear crisis. Petroleo Brasileiro SA, Brazil’s state-controlled oil company known as Petrobras, fell 0.9 percent and Vale SA, the world’s largest iron-ore producer, declined 1.7 percent. PetroChina Co., the listed unit of China’s biggest energy company, dropped 3.5 percent in Hong Kong.
Credit-default swaps on Bahrain jumped 44 basis points to 359, the highest since July 2009, according to CMA. The Bloomberg GCC 200 Index of Persian Gulf shares sank 2.5 percent. Saudi Arabian troops arrived in Bahrain as part of a regional force from the six-member Gulf Cooperation Council, the first outside intervention since a wave of popular uprisings swept through parts of the Arab world.
Bahrain declared a state of emergency for three months and King Hamad bin Isa Al Khalifa asked the head of the military to guarantee security across the country, state television said.