Emerging-market stocks posted the longest weekly slump since June as a cut in U.S. stimulus spurred capital outflows and Chinese money-market rates rebounded. Turkey’s lira and the Brazilian real fell.
Huaxia Bank Co. slid in Shanghai as Chinese shares posted the longest losing streak in 19 years. Brazil’s Ibovespa slipped 0.9 percent, while India’s S&P BSE Sensex rose the most among global markets. The lira depreciated to a record as the Turkish government continued to dismiss police chiefs amid a corruption probe. The real has fallen 7.1 percent this quarter on concern Brazil’s fiscal deterioration will lead to a reduced credit rating.
The MSCI Emerging Markets Index retreated 0.2 percent to 988.26 in New York, the lowest close since Nov. 13, in its third weekly slide. The Federal Reserve said Dec. 18 it will reduce a record bond buying program by $10 billion, while pledging to keep interest rates near zero. China’s seven-day repurchase rate rose to the highest since a record cash crunch in June even after the central bank injected funds.
“Tapering is just not good for emerging-market currencies, and the repeat of last June’s liquidity tensions in China is weighing on financial stocks,” Martial Godet, head of emerging-market equity and derivatives strategy at BNP Paribas SA in Paris, said by e-mail. “Chinese financial tensions should abate. The weakness of EM currencies” may continue into the middle of 2014, he said.
The MSCI Emerging Markets Index has decreased 6.3 percent this year and trades at 10.4 times projected 12-month earnings. The MSCI World Index has surged 22 percent in the period, and has a multiple of 14.6, data compiled by Bloomberg show.
The iShares MSCI Emerging Markets ETF slipped 0.1 percent to $40.48, ending the week with a 1.1 percent decline. U.S. gross domestic product climbed at a 4.1 percent annualized rate, the strongest since the final three months of 2011 and up from a previous estimate of 3.6 percent, Commerce Department figures showed in Washington.
All but one industry group in the developing-nation gauge dropped today, led by utility companies. Hanergy Solar Group Ltd., based in Hong Kong, tumbled 16 percent, sliding the most on the measure.
The lira weakened 0.9 percent versus the dollar for a fourth day of losses. Yields on Turkey’s two-year benchmark notes increased 25 basis points to 9.61 percent, the highest since Sept. 3. The government dismissed 14 chiefs at the national police today, NTV television reported, in addition to some 50 yesterday, according to a Bloomberg HT report.
The dismissals came after police detained dozens, including the head of a state bank and the sons of three cabinet ministers, in an inquiry into graft.
The real fell 1.3 percent, the worst performance among 24 emerging-market counterparts, after Brazil’s central bank said it must remain “especially vigilant” on inflation, adding to speculation that policy makers will maintain the pace of increases in borrowing costs.
The Ibovespa slumped the most in a week, led by online retailer B2W Cia. Digital, which sank 4.7 percent, and PDG Realty SA Empreendimentos e Participacoes, down 3.2 percent.
Hungary’s BUX Index retreated 0.9 percent to the lowest level in a week. The nation’s cabinet will discuss “legal solutions” to reduce installments on foreign-currency denominated household loans by as much as 20 percent before elections, newspaper Nepszabadsag reported, citing an unidentified person close to the government.
Yields on Ukrainian bonds due June 2014 fell 57 basis points to 7.9 percent, dropping below 8 percent for the first time since June.
Russia plans to buy $15 billion of Ukrainian bonds, starting with a $3 billion purchase of two-year notes as soon as this year, Russian Finance Minister Anton Siluanov said on Dec. 17. While the cash is enough to cover Ukraine’s financing needs through next year, the country is still grappling with a record current account deficit and an economy mired in a third recession since 2008. Russia’s Micex Index slipped less than 0.1 percent.
Emerging-market assets are poised to rally next month after pricing in the Fed move, according to Benoit Anne, the head of emerging-market strategy at Societe Generale SA in London. “Investors will go after the cheap FX valuations and the attractive bond markets,” Anne said in an e-mail yesterday.
The premium investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 315 basis points, JPMorgan Chase & Co. indexes show.
Huaxia Bank dropped 3.9 percent to the lowest close since Oct. 25. The Shanghai Composite tumbled 2 percent, its ninth day of declines, with volumes at 61 percent of the three-month daily average. The gauge completed the longest stretch of losses since December 1994 as targeted fund injections by the central bank failed to alleviate the worst cash crunch since June.
The seven-day repurchase rate, a gauge of liquidity in the financial system, increased 100 basis points to a six-month high of 7.60 percent in Shanghai, according to a daily fixing by the National Interbank Funding Center.
The People’s Bank of China conducted short-term liquidity operations recently, it said on its microblog yesterday, without giving details of the recipients, amount or rate charged for the financing. The monetary authority injected 200 billion yuan ($32.9 billion), online financial news provider Netease reported, citing a person it didn’t identify.
India’s Sensex climbed to a one-week high. The Philippine Stock Exchange Index sank 1.5 percent. The Jakarta Composite Index retreated for the first time in four days, losing 0.9 percent, as the rupiah weakened to a five-year low.
Thailand’s SET Index slipped 0.3 percent, while the baht posted its biggest weekly retreat in four months. The currency touched a three-year low today before anti-government protesters rally on the streets of Bangkok to attract support ahead of a major demonstration planned for Dec. 22.