Emerging-market stocks fell from an 18-month high with Russian shares ending a three-day gain as investors weighed the risk of new sanctions and after a surprise increase in borrowing costs.
The MSCI Emerging Markets Index lost 0.2 percent to 1,078.69. The Micex index ended a three-day gain in Moscow, while the ruble depreciated for a second day. Lender Banco Bradesco SA led a decline in Brazil’s Ibovespa.
Developing-nation equities rose 1.5 percent this week as a gauge of Chinese manufacturing increased more than forecast. The Russian central bank lifted its one-week auction rate as the intensifying conflict over Ukraine and the threat of wider sanctions squeeze the economy and undercut the ruble. A ban on European purchases of bonds or shares sold by Russian state-owned banks is among options being weighed by the European Union, according to a proposal presented to member states.
“There are ongoing worries about further sanctions, which is perhaps causing traders to close out positions ahead of the weekend,” Tony Hann, head of emerging-market equities at Blackfriars Asset Management Ltd., said by e-mail.
The developing-nation gauge has gained 7.6 percent this year and trades at 11.2 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has risen 5.2 percent in the period, and is valued at a multiple of 15.1.
The Micex Index lost 1.4 percent. Predictions the EU will impose measures targeting Russian industries have increased, with 48 percent of 29 economists in a Bloomberg survey expecting the move, compared with 4 percent in June. The survey was conducted July 18-23.
The ruble weakened 0.5 percent versus the dollar. By raising rates, the Russian central bank is trying to tamp down inflation expectations and stop capital leaving the country as some investors balk at the fallout from President Vladimir Putin’s stance on Ukraine.
The Ibovespa fell 0.3 percent. Bradesco slid 0.8 percent, contributing the most to the Brazilian benchmark’s decline.
Turkey’s Borsa Istanbul 100 Index rose 0.5 percent, taking the gain this week to 2.3 percent. The country’s trade deficit in June topped economists’ predictions as a stronger lira and lower interest rates fuel an uptick in domestic demand. The currency depreciated 0.1 percent against the dollar today, reducing its gain this year to 2.6 percent.
India’s S&P BSE Sensex index retreated 0.6 percent, ending an eight-day rally. Software exporter Wipro Ltd. dragged the measure from a record, dropping 4.6 percent after its sales growth lagged peers.
Six of 10 industry groups in the emerging-markets measure dropped, paced by technology shares. The premium investors demand to own emerging-market debt over U.S. Treasuries increased five basis points to 264, JPMorgan Chase & Co. indexes show.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong gained 0.5 percent to the highest level since Dec. 13. Mark Mobius, executive chairman of Templeton Emerging Markets Group, says it’s not too late to buy into the rally in Chinese stocks.
China’s Shanghai Composite Index rose 1 percent. The gauge soared 3.3 percent this week, the most in three months.