Emerging-market stocks fell as violence in Iraq and Ukraine escalated and traders speculated the resumption of new share sales in China will divert funds.
The Micex Index slid the most since April 15 on concern new sanctions will be imposed on Russia and after rebels in Ukraine violated a cease-fire. A gauge of Hong Kong-traded Chinese shares retreated to a four-week low. Akbank TAS fell in Istanbul after Fitch Ratings downgraded its debt. The Ibovespa dropped as Brazilian banks sank amid speculation state-backed lending will hurt their profits. Shares in Dubai rose following a three-day slump that pushed the gauge into a bear market.
The MSCI Emerging Markets Index slid 0.6 percent to 1,042.07. Insurgents are firming their hold on a swath of Iraq, according to U.S. officials, as the Wall Street Journal said Syrian warplanes killed at least 50 people. China’s first initial public offerings in four months start trading tomorrow. The U.S. economy contracted in the first quarter by the most since the depths of the last recession.
“Sentiment is concerned about geopolitics again,” Nick Paulson-Ellis, co-head of global emerging markets at Espirito Santo Investment Bank in London, said by e-mail. “People are worried about the situation in Iraq and the United Arab Emirates has been very weak in recent weeks after an amazing run.”
Nine out of 10 industry groups in the developing-nation gauge fell as an energy measure lost 1.3 percent, the most since May 30.
The Micex slumped 2.4 percent, the steepest retreat since April 15. Rebels yesterday shot down a government helicopter with a shoulder-fired missile in the eastern city of Slovyansk, killing all nine people on board, according to the Ukrainian Defense Ministry. The U.S. is preparing sanctions aimed at specific areas of the Russian economy, including energy and technology, according to three people briefed on the plans.
“Market participants will be closely watching events in Ukraine today. Despite the cease-fire, fighting continues,” Oleg Shagov, head of equity research at OAO Promsvyazbank, said by phone. “If new sanctions are announced, the market will react negatively.”
The yield on Ukraine’s July 2017 dollar-denominated bonds rose 17 basis points to 8.61 percent, after slumping 1.23 percentage points yesterday.
The Ibovespa declined 1.6 percent in Sao Paulo. Banco Bradesco SA led a decline in lenders, sinking 4.6 percent, after the Brazilian government said it will inject 30 billion reais ($13.6 billion) into the state development bank BNDES.
Dubai’s DFM General Index jumped 6.1 percent, rebounding from the steepest 3-day loss since 2009. The gauge entered a bear market two days ago after stocks declined 20 percent from a peak in May, stoking concern that five years after the global financial crisis the real-estate recovery in the Middle East business hub has become overblown.
Arabtec Holding Co., the United Arab Emirates’ largest-listed builder that fueled a selloff amid top-level dismissals, advanced 5.1 percent.
OTP Bank Nyrt. lost 1.1 percent in Budapest to the lowest since May 15. Hungary discussed a bill that would force lenders to reimburse borrowers for unfair use of exchange-rate margins in foreign-currency mortgages, in line with a supreme court ruling earlier this month.
South Africa Rates
The emerging-markets gauge has risen 3.9 percent this year and trades at 10.9 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 4.6 percent and is valued at a multiple of 15.1.
South Africa’s rand appreciated 0.4 percent against the dollar. Central bank deputy governor Daniel Mminele said rates will have to rise to curb inflation.
The zloty strengthened 0.6 percent and Polish government bonds rose for a third day. Prime Minister Donald Tusk won a vote of confidence to steady a government shaken by scandal over leaked recordings of conversations between public officials.
The premium investors demand to own developing-nation debt over U.S. Treasuries was unchanged at 264 basis points, according to JPMorgan Chase & Co. indexes.
China Telecom Corp. fell 2.6 percent after Sina.com reported the government will grant mobile licenses to at least seven companies within two weeks.
The Hang Seng China Enterprises Index dropped 0.7 percent. Ten companies have started the process to list their shares since June 10, China’s regulator said in a statement on its microblog yesterday. It halted IPO sales for at least a year through November to strengthen the quality of listed businesses and prevent investors from colluding to manipulate prices.
The Kospi index declined 0.6 percent. The rupiah depreciated 0.8 percent to the lowest level since February after Indonesia’s central bank said it will allow weakness in the currency to help exports.