Emerging-market stocks fell to a six-week low as Russian retailers slid after President Vladimir Putin retaliated against U.S. and European Union sanctions with an array of bans on food imports. The ruble weakened.
OAO Magnit, Russia’s largest food retailer, retreated 5.2 percent, the most in five months. African Bank Investments Ltd. plunged 81 percent in Johannesburg, extending yesterday’s slide after the lender said it expects a record loss. The Philippine peso slid as the World Bank cut its growth forecast for the nation’s economy. Citic Securities Co. lost 2.4 percent in Hong Kong after profit declined. Brazil’s Ibovespa dropped as exchange operator BM&FBovespa SA led losses in financial stocks.
The MSCI Emerging Markets Index decreased 0.7 percent to 1,049.64, the lowest since June 27. Russia’s import curbs include all cheese, fish, beef, pork, fruit, vegetables and dairy products from the U.S. and the EU, Prime Minister Dmitry Medvedev said today at a cabinet meeting. The limits also affect Canada, Australia and Norway.
Russian retailers tumbled because “a significant part of their revenues, 15 percent to 30 percent, comes from imported food products,” Martial Godet, the head of emerging-market equity and derivatives strategy at BNP Paribas SA in Paris, said by e-mail. “On Ukraine, it is now clear that the only way is an internal political solution based on certain degree of federalism. In the meantime, investors will continue to reduce their Russian holdings.”
The ruble fell 0.4 percent against the dollar, extending its decline after the government in Kiev said pro-Russian rebels in eastern Ukraine shot down a fighter jet and military helicopter.
The Micex Index declined 0.1 percent in Moscow, its third day of losses. Magnit’s shares in London slid 5.2 percent, while Russia-traded stocks of retailers OAO Dixy Group and Lenta Ltd. lost 1.8 percent and 4.1 percent, respectively.
Putin yesterday ordered import restrictions in response to deeper sanctions by the EU, which last week limited the ability of the country’s lenders from selling bonds and shares in the 28-nation bloc. The ban comes as the U.S. joined NATO and Poland in warning about the risk of Russia sending troops into Ukraine. Russia called reports of a military buildup on its western border “groundless.”
A Bloomberg gauge tracking 20 emerging-market currencies fell for a third day, while the premium investors demand to own developing-nation debt over U.S. Treasuries widened six basis points to 295.
The Ibovespa retreated 0.5 percent as BM&FBovespa dropped 2.8 percent. Brazil’s real weakened 0.8 percent, the worst performance among emerging-market currencies. Poland’s stock index decreased 1.3 percent, while measures in Hungary and South Africa fell at least 0.8 percent.
“The escalating tensions in Ukraine have increased investors’ aversion to risk,” Geoffrey Ng, an adviser for strategic investments at Fortress Capital Asset Management Sdn., which oversees about 1 billion ringgit ($312 million), said in Kuala Lumpur. “It’s not surprising the market has continued the weak trend.”
South Africa’ rand weakened 0.7 percent against the dollar before the release of manufacturing data. African Bank Investments, the country’s largest provider of unsecured loans, plunged the most on record, extending yesterday’s 61 percent slump, after saying it expects a record loss and will need to tap investors for $791 million.
Nine out of 10 industry groups in the MSCI Emerging Markets Index fell, led by technology and consumer discretionary shares. Tencent Holdings Ltd., Asia’s biggest Internet company, fell 3.5 percent. Infosys Ltd. slid 1.9 percent in Mumbai.
The developing-nation measure has gained 4.8 percent this year and trades at 11 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has advanced 1.4 percent in 2014 and is valued at a multiple of 14.6.
Citic Securities, China’s biggest listed brokerage, retreated after its July net income fell to 444.8 million yuan from June’s 645 million yuan. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong sank 0.9 percent.
The World Bank cut its economic growth forecast for the Philippines this year to 6.4 percent from 6.6 percent. The peso weakened 0.7 percent in its second day of losses.