Emerging-market stocks posted the biggest drop in eight weeks on mounting concern the U.S. will take military action in Syria. Dubai’s DFM General Index sank the most in the world, while Turkey’s lira fell to a record.
The MSCI Emerging Markets Index retreated 1.9 percent to 915.44. The DFM tumbled 7 percent, the most among 94 gauges tracked by Bloomberg. The Borsa Istanbul National 100 Index slipped 4.7 percent as central bank Governor Erdem Basci ruled out raising the overnight lending rate and the lira dropped past 2 per dollar for the first time. Thai’s SET Index entered a bear market amid concern foreign outflows will accelerate, while India’s rupee plunged the most since 1996.
Stocks in developing nations joined a global selloff after U.S. Secretary of State John Kerry said yesterday that President Barack Obama believes there must be accountability for the “moral obscenity” of using chemical weapons in Syria. Oil surged to an 18-month high as Foreign Minister Walid al-Muallem said today Syria’s defenses will “surprise” the world should the U.S. and its allies decide on military strikes.
“Concerns about Syria are definitely front and center,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management which oversees $180 billion, said by phone. “We had a weak environment to begin with and the geopolitical situation is just one more nail in the coffin to cause additional uncertainty.”
Global funds have withdrawn about $44 billion from emerging-market stock and bond funds since the end of May through last week, according to data provider EPFR Global, a Cambridge, Massachusetts-based firm that tracks fund flows.
All 10 groups in the MSCI Emerging Markets Index fell today by at least 0.6 percent, led by health-care and consumer-staple shares. The gauge of developing nations extended this year’s plunge to 13 percent, compared with an 11 percent advance for a measure of developed markets.
The iShares MSCI Emerging Markets Index exchange-traded fund dropped 2.3 percent to $37.36. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, jumped 13 percent to 28.55.
Brazil’s Ibovespa slid 2.6 percent as PDG Realty SA led declines in homebuilders amid mounting speculation that Brazilian policy makers will extend a cycle of interest-rate increases to tame inflation. Eike Batista’s OGX Petroleo & Gas Participacoes SA plunged 15 percent. The real rose 0.3 percent.
Russian stocks dropped for a third day as the country’s biggest companies, including OAO Sberbank and OAO Magnit, fell on concern slowing economic growth will crimp profits. Bank of America Corp. cut Russia’s GDP growth outlook today to 2.5 percent, citing weak second-quarter data.
The Borsa Istanbul National 100 Index sank the most since June 20, led by banks. Basci said he won’t increase interest rates to fight a deepening slump in the lira, and instead promised to use “surprise” tools to reverse the trend.
India’s rupee plunged to a record low on concern the nation’s current-account deficit will worsen, extending this year’s tumble to 17 percent. The S&P BSE Sensex sank 3.2 percent as HDFC Bank Ltd. plunged the most in more than four years, dragging a measure of 13 lenders to a 19-month low.
China’s stocks rose to a two-week high as profit growth for industrial companies accelerated. PetroChina Co. was suspended from Shanghai and Hong Kong trading pending an announcement. The nation’s biggest energy producer said three senior managers resigned amid a government probe, as China’s new leaders step up their campaign against corruption.
Thai stocks retreated for a ninth day, sending the benchmark index down more than 20 percent from this year’s high. The Philippine Stock Exchange Index lost 4 percent to the lowest level since June 25. The Jakarta Composite index fell below the 4,000 level for the first time in a year.
The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.09 percentage point to 355 basis points, according to JPMorgan Chase & Co.