Emerging-market stocks fell to a two-week low after German manufacturing and business confidence unexpectedly declined and company earnings reports stoked concern that the global slowdown is curbing profits.
Brazilian oil company OGX Petroleo e Gas Participacoes dropped to the lowest level since January 2009, the steepest decline on the MSCI Emerging Markets Index. OAO Lukoil, Russia’s second-biggest oil producer, also fell as crude dropped for a fifth day. Honam Petrochemical Corp., South Korea’s second-biggest maker of petrochemical products by market value, dropped the most since July after third-quarter profit tumbled.
The benchmark index dropped 0.2 percent to 994.55 at the close of trading New York, its lowest close since Oct. 10. About 62 percent of companies on the MSCI gauge that reported quarterly earnings have trailed analysts’ estimates, data compiled by Bloomberg show. A German index based on a survey of purchasing managers in the manufacturing industry fell to 45.7 this month from 47.4 in September and business confidence fell in October, according to data from Markit Economics and the Ifo institute in Munich today.
“The market continues to gravitate between risk-on and risk-off,” Geoffrey Ng, who helps oversee $1.8 billion as chief executive officer at Hong Leong Asset Management Bhd., said by phone from Kuala Lumpur. “There will be continued weakness in results in the fourth quarter.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, gained 0.1 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 0.7 percent.
Russia, Brazil Sink
Russia’s Micex Index lost 0.3 percent, Dubai’s DFM General Index fell 0.5 percent and Brazil’s Bovespa fell 0.9 percent. Hungary’s BUX Index and the Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong slipped at least 1 percent as trading resumed after holidays.
Gauges of energy, industrial and consumer discretionary shares led declines among 10 industry groups. Telecommunication services stocks in the MSCI Emerging Markets Index climbed 0.3 percent, the biggest gain, on speculation earnings will be more sheltered from the global slowdown.
South Korea’s Kospi index sank 0.7 percent to its lowest close since Sept. 6. The Shanghai Composite Index gained 0.1 percent, erasing an earlier loss of 0.5 percent, after data signaled a Chinese manufacturing slump is easing.
Poland’s zloty, the biggest loser among emerging-market currencies tracked by Bloomberg, weakened 0.7 percent against the euro.
Russia’s ruble-denominated bonds due in February 2019 slid for a second day, driving the yield up one basis point to 7.23 percent. The government scrapped a sale of seven-year bonds for the first time since May as investors demanded higher yields than the government offered after Urals crude dropped.
German business confidence fell to the lowest since February 2010. The Ifo institute said its business climate index dropped to 100.0 from 101.4 in September, the sixth straight decline. Economists predicted an increase to 101.6, according to the median of 39 forecasts in a Bloomberg News survey.
The 21 nations in MSCI’s developing-nations index send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show.
MSCI’s measure of developing-nation equities has climbed 8.5 percent this year, trailing a 9.8 percent increase in the MSCI World Index of developed countries. The emerging-markets gauge trades at 11.5 times estimated profit, compared with the MSCI World’s 13.1, according to data compiled by Bloomberg.
BR Malls Participacoes SA tumbled 4.9 percent in Sao Paulo after the company reported same-store sales increased 6.2 percent in the third quarter from a year earlier, below the 7 percent growth seen in the last quarter. OGX slumped 7.8 percent to the lowest level since January 2009.
Honam Petrochemical lost 5.2 percent in Seoul after third-quarter net income sank 51 percent to 163.3 billion won ($148 million). Its unit KP Chemical Corp. slid 6.3 percent, the second biggest decliner on the benchmark index, after reporting a net loss of 1.53 billion won compared with a profit of 62 billion won a year earlier.
Kia Motors Corp. slumped 4.4 percent to a 14-month low on concern the automaker may report weaker-than-expected quarterly profit, Lee Hyun Soo, an analyst at Kiwoom Securities Co., said by phone. Kia is scheduled to release results on Oct. 26.
Lukoil declined 1.1 percent and OAO Gazprom, Russia’s biggest natural-gas exporter, lost 0.4 percent.
Emaar Properties retreated 1.9 percent, the most since Oct. 8, after third-quarter net income dropped 5 percent to 387 million dirhams ($105 million), compared with analysts’ estimates of 476 million dirhams.
China Rongsheng Heavy Industries Group Holdings Ltd. jumped 5.7 percent to a three-month high in Hong Kong, after the company got a tender-barge order from a Norwegian customer.
UEM Land Holdings Bhd., a Malaysian property developer, rallied 11 percent in Kuala Lumpur, the most since January 2011. The company announced yesterday a joint venture with Ascendas Land International Pte. to develop a S$1.5 billion technology park in Malaysia’s southern state of Johor.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 278, according to JPMorgan Chase & Co.’s EMBI Global Index.