Emerging Stocks Fall to Three-Week Low as Chinese Profits Slump

Emerging-market stocks dropped to a three-week low as Chinese industrial companies in July posted their biggest decline this year, heightening concern that global demand for natural resources will continue to ebb.

The MSCI Emerging Markets Index fell 0.5 percent to 960.86 at 5:20 p.m. in New York, the lowest close since Aug. 3. Samsung Electronics Co. declined the most in almost four years in Seoul after a U.S. jury ruled it infringed Apple Inc.’s patents. Samsung Electronics, the heaviest weighted stock on the MSCI Emerging Markets Index, fell the second most of any stock on the gauge. The Shanghai Composite Index retreated 1.7 percent, the most in six weeks, while Brazilian iron-ore producer Vale SA, whose top export market is China, declined as the Bovespa index fell for a third session, its longest losing streak in a month.

Chinese industrial companies’ profits fell 5.4 percent last month after slipping 1.7 percent in June, the statistics bureau said on its website. Chinese industrial companies including China Petroleum & Chemical Corp. reported a decline in profits. China Petroleum, Asia’s biggest oil refiner, recorded its lowest half-year profit since 2008. Commodities, including oil, declined.

‘Big Story’

“China is the big story, and the slowdown there is impacting a lot of investors’ concerns,” Matt McCormick, who helps oversee $6.5 billion, as a fund manager at Bahl & Gaynor Inc. in Cincinnati, said in a phone interview. “Many people think ‘so goes China, so goes emerging markets.’ With China slowing, a recession in Europe and the U.S. on hold until after the elections, it’s natural to conclude that emerging markets are going to be slowing as well.”

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong lost 1.3 percent. Mexico’s IPC index fell 0.6 percent as Mexichem SAB, the chemicals producer, dropped the most in 11 months after announcing a financing plan including a $1 billion sale of new shares. India’s Sensitive Index declined as Jindal Steel & Power Ltd. slumped to a more than three-year low.

Russia’s Micex Index slipped 0.4 percent, the first decline in three days. Brazil’s Bovespa index retreated 0.5 percent and India’s Sensex lost 0.6 percent. Benchmark gauges in South Korea, Poland and Chile lost ground. A measure of technology stocks in the MSCI Emerging Markets Index declined 2.1 percent, the worst performer among 10 industry groups.

The developing-nation gauge has climbed 4.8 percent this year, trailing an 8.8 percent gain by the MSCI World Index. Shares in the emerging-markets index trade at 10.8 times estimated earnings, compared with the MSCI World’s multiple of 13, according to data compiled by Bloomberg.

China’s Premier Wen Jiabao called for extra measures to support exports and help meet economic targets, the official Xinhua News Agency said Aug. 25.

Samsung Tumbles

Samsung Electronics tumbled 7.5 percent in Seoul, the largest decrease since October 2008. A U.S. court ordered the South Korean company to pay more than $1 billion for infringing Apple Inc.’s patents for mobile devices.

Samsung Electro-Mechanics Co., a supplier of handset parts to Samsung Electronics, plunged 6.4 percent. HTC Corp., a mobile phone maker, fell 1.9 percent in Taipei. Two of the patents in the case brought by Apple against Samsung are also part of the iPhone maker’s case targeting more than a dozen HTC devices before the International Trade Commission. HTC declined to comment in an e-mail. Foxconn Technology Co., a supplier to Apple, rose 1.8 percent in Taipei.

Earnings Drop

Vale fell 1.6 percent as data showing that China’s economy is slowing damped the outlook for Brazilian exports.

TSRC Corp. slid 6.9 percent, the most since July 2010, after the Taiwanese synthetic rubber maker reported lower profit. The company’s diluted earnings per share fell to NT$1.65 a share in the first half from NT$4.18 a share in the previous year. Aluminum Corp. of China Ltd., the nation’s No. 1 supplier of the metal, slid 4 percent in Hong Kong, while China Airlines Ltd. dropped 2.1 percent in Taipei after the companies reported first-half losses.

“Corporate earnings in the region have been significantly affected by the sharp slowdown in the global economy,” Saharat Chudsuwan, chief investment officer at Bangkok-based Tisco Asset Management Co., which manages about $4.8 billion, said by phone.

Indonesia’s exchange delayed trading after almost a third of its members were unable to connect to the bourse’s trading system.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE