Emerging-market stocks tumbled to the lowest level in three months, led by Russian equities, as Europe’s bailout of Cyprus sparked concern over more financial turmoil. Currencies weakened and borrowing costs climbed.
VTB Group, Russia’s second-largest lender, capped the biggest plunge in 10 months. The Hang Seng China Enterprises Index fell 12 percent from this year’s high as JPMorgan Chase & Co. downgraded the nation’s shares. Hungary’s forint pared an earlier drop that took it to a 14-month low against the euro. Brazil’s Bovespa Index rebounded as B2W Cia. Global do Varejo, the nation’s biggest online retailer, jumped 3.8 percent.
The MSCI Emerging Markets Index fell 1.2 percent to 1,030.11 in New York, its sixth day of losses. European finance ministers reached an unprecedented agreement March 16 forcing depositors in Cypriot banks to share in the cost of the latest euro-area bailout. Including loans to companies registered in Cyprus, Russia’s “exposure” is about $60 billion, according to Moody’s Investors Service.
“It’s not so much Cyprus itself, but it reminds people that there’s still risk in Europe,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $170 billion, said by phone. “It really shakes confidence in the banking system.”
Cyprus’ banks will remain closed on Tuesday and Wednesday, according to a government official, as lawmakers meet tomorrow to vote on a bank tax to raise 5.8 billion euros ($7.6 billion) as part of a bailout aimed at preventing a financial collapse and a possible exit from the euro area. European policy makers signaled flexibility on the application of the tax, seeking to overcome outrage that threatens to derail the nation’s bailout.
All 10 groups in the developing-nations index dropped today as technology and financial shares had the biggest losses. The broader measure has slipped 2.4 percent this year and trades at 10.8 times estimated 12-month earnings, according to data compiled by Bloomberg. That compares with a multiple of 14.1 for the MSCI World Index of developed-nation shares, which has climbed 6.9 percent in 2013.
The iShares MSCI Emerging Markets Index exchange-traded fund fell 1.1 percent to $42.29. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, jumped 16 percent to 18.53.
Brazil’s Bovespa rose 0.2 percent, rebounding from an earlier decline of as much as 1.3 percent. B2W snapped a two-day slump. Mexico’s equity market is closed for a holiday.
Russia’s Micex Index slid 2.2 percent, the most among 21 emerging markets tracked by Bloomberg. VTB Group, the nation’s second-biggest lender, slumped 5.3 percent. Cyprus is the biggest direct investor into Russia and the biggest recipient of Russian investment abroad, according Russia’s central bank.
Hungary’s BUX Index slid 1.1 percent, declining for a fifth day, the longest losing streak since Dec. 10. Poland’s WIG 20 Index fell 1.3 percent.
The Hang Seng China index slumped to a three-month low. JPMorgan cut China to underweight and recommended bearish derivatives tied to the country’s four biggest banks. SAIC Motor Corp. led losses by automakers as the nation’s quality watchdog ordered partner Volkswagen AG to recall some vehicles.
The extra yield investors demand to own developing-nation dollar debt over U.S. Treasuries fell one basis point, or 0.01 percentage point, to 287, according to the JPMorgan Chase & Co. EMBI Global Index.