Emerging-market stocks ended their longest streak of gains since January 2005 as investors bet valuations near a five-year high have made stocks too expensive.
The Ibovespa slid for the first time in four days after data showed a surprise drop in Brazilian retail sales. Chinese stocks trading in Hong Kong declined from the highest level since 2008. The Micex Index slid to a two-week low in Moscow. The ruble extended the world’s best currency rally as Russia prepared for the biggest debt auction in 15 months.
The MSCI Emerging Markets Index dropped 0.5 percent to 1,036.77, ending an 11-day gain that pushed the gauge’s valuation to 12.5 times the projected earnings of its members. The gauge has advanced 8.4 percent this year. That compares with a 4.1 percent increase in the MSCI World Index, which trades at a multiple of 17.
“Emerging market stocks are taking a breather,” Michael Wang, a strategist at Amiya Capital LLP in London, said by e-mail. “Given the earnings outlook, valuations aren’t that attractive.”
Emerging-market stocks were little changed for the year before the 11-day rally began as oil-price volatility and a standoff between the new Greek government and its creditors offset bond purchases by the European Central Bank and interest-rate cuts from India to Turkey.
This month’s advances amid speculation China will boost stimulus have helped emerging-market stocks outpace their developed-country peers.
“Valuations are becoming expensive,” Danny Wong Teck Meng, chief executive officer of Areca Capital Sdn., which manages 800 million ringgit ($216 million), said by phone from Kuala Lumpur. “Time to start to be selective in stocks. It is not a broad-based surge any more.”
United Co. Rusal fell 3.7 percent in Moscow, extending its four-day drop to 11 percent. The company that was dethroned last year as the world’s largest aluminum producer restated its 2014 results on Monday to a loss of $91 million from a profit of $293 million. The Micex declined 1.8 percent.
The ruble appreciated 2.2 percent to 50.897 per dollar. the currency has gained 22 percent in the past month as oil prices stabilized and a cease-fire in Ukraine held. Russia’s Finance Ministry will offer 30 billion rubles of OFZ bonds at an auction on Wednesday, the most since January 2014.
The Ibovespa declined 0.5 percent as consumer stocks including homebuilder Gafisa SA tumbled. Brazil’s retail sales declined 0.1 percent in February from a month earlier, the national statistics agency reported. The median forecast of economists surveyed by Bloomberg was for a 0.2 percent increase.
The Shanghai Composite Index climbed 0.3 percent before the release of economic growth data Wednesday. China’s first-quarter growth probably fell to 7 percent, the slowest pace since the first quarter of 2009, according to a Bloomberg survey.
Tencent Holdings Ltd., the operator of Asia’s most-popular message services, tumbled the most in a year in Hong Kong after its chairman, Ma Huateng, cut his stake to 9.65 percent from 9.86 percent. The Hang Seng China Enterprises Index dropped the most since January as China Merchants Bank Co. lost 6.1 percent.
The premium investors demand to own emerging-market debt over U.S. Treasuries increased three basis points to 348 basis points, according to JPMorgan Chase & Co. indexes.