Emerging-market stocks fell to the lowest level since November amid unrest in Egypt and Turkey as investors weighed prospects for Federal Reserve stimulus. Russia’s dollar-denominated RTS Index entered a bear market.
Egypt’s EGX 30 Index tumbled the most in six months as political tensions increased ahead of planned demonstrations marking the first anniversary of Islamist President Mohamed Mursi taking office. Turkey’s lira weakened and bond yields surged after a fifth day of protests, while Akbank TAS drove stocks lower after being downgraded at Bank of America Corp. Steelmaker Usinas Siderurgicas de Minas Gerais SA drove Brazil’s Ibovespa to the lowest level since July 25.
The MSCI Emerging Markets Index lost 1.3 percent to 991.38, the lowest level since Nov. 28. Investors brace for a western backlash against Egypt after a court sentenced workers in pro-democracy organizations to prison. Protesters accusing Turkish Prime Minister Recep Tayyip Erdogan of autocratic governance clashed overnight with police. Fed Bank of Dallas President Richard Fisher called for a reduction in bond purchases.
“On the top of the list is concern about Fed tapering and what that means into emerging markets,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management which oversees $180 billion, said by phone.“The situation in Turkey isn’t good. It doesn’t help.”
All 10 groups in a measure of developing-nation stocks fell, led by consumer discretionary shares. The broad gauge trimmed this year’s drop to 6.1 percent, compared with an 8.4 percent jump in the MSCI World Index.
The iShares MSCI Emerging Markets Index exchange-traded fund slid 1.8 percent to $40.56. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 7,1 percent to 24.99.
Brazil’s Ibovespa lost 2.3 percent as Usiminas tumbled 5.6 percent, while iron-ore producer Vale SA fell for the first time in three days, contributing most to the benchmark’s decline. Brazil’s real approached a four-year low, prompting the central bank to intervene in the currency market after the government’s removal of a 6 percent tax on foreign investors failed to produce a sustained rally.
Russian stocks declined as OAO Russian Grids, the nation’s largest electricity distribution company, and its unit Federal Grid Co. dropped on concern a plan to boost investments will curb free cash flows. The ruble-based Micex Index decreased 1.1 percent, while the dollar-denominated RTS Index retreated 1.6 percen, extending its drop from Jan. 28 to 20 percent.
The Borsa Istanbul Stock Exchange National 100 Index sank as Akbank tumbled 1.6 percent after Bank of America cut the lender part-owned by Citigroup Inc. to the equivalent of sell from neutral in a report today.
Egypt’s EGX 30 Index tumbled 2.9 percent, the most since Dec. 6 at the close in Cairo. Orascom Telecom Holding SAE plunged the most since November while private equity firm Egyptian Kuwaiti Holding fell to the lowest since 2009.
South Africa’s rand fell for a second day and bond yields surged after South African Reserve Bank Governor Gill Marcus said price stability remains the central bank’s primary focus even as growth slows.
The Hang Seng China Enterprises Index of mainland companies slid 0.6 percent as developers slid after home sales in the city fell, with the Hang Seng property gauge posting its longest losing streak since February. GCL-Poly Energy Holdings Ltd., the world’s No. 1 maker of polysilicon used in solar panels, jumped 6.1 percent after the European Union imposed smaller-than-expected tariffs on panels from China.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose six basis points, or 0.06 percentage point, to 307 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.