Emerging-market stocks fell from a six-month high as China tightened rules on margin trading and data showed that the cost of living in the U.S. is picking up, strengthening the case for the Federal Reserve to raise interest rates.
Chinese stock index futures tumbled after the close of trading in Shanghai as regulators clamped down on the use of shadow financing for equity purchases and increased the supply of shares available for short sellers. The MSCI Emerging Markets Index lost 0.9 percent to 1,042.68. A Bloomberg gauge tracking 20 emerging-market currencies slipped 0.3 percent.
China banned the margin-trading businesses of brokerages from using so-called umbrella trusts and allowed fund managers to lend shares to short sellers, statements showed Friday. The changes would make it easier for bearish traders to bet on a retreat after the Shanghai Composite Index closed at a seven-year high. The cost of living in the U.S. excluding food and fuel rose 0.2 percent in March for a third month, signaling inflation is starting to firm, data in Washington showed.
The regulatory moves in China “look like an additional factor to add to the list of reasons to be cautious,” Nigel Rendell, an analyst at Medley Global Advisors LLC in London, said by e-mail. “The end of cheap global liquidity -- with the Fed at the start of the queue on the tightening cycle -- is another factor dominating investors’ minds.”
The emerging-markets stock index gained 0.8 percent in a third straight weekly advance. The gauge’s 14-day relative-strength index jumped to 79 on Thursday, the highest level since January 2013 and above the threshold of 70 that signals to some analysts that a security is poised to decline.
FTSE China A50 Index futures for April delivery fell 6 percent. Contracts on the Hang Seng China Enterprises Index lost 2.5 percent.
Russia’s ruble weakened 4 percent amid speculation the world’s best-performing currency had climbed too far too fast given the outlook for an economy on the brink of recession. The dollar-denominated RTS Index tumbled 5.9 percent, the first decline in five days.
The ruble is still up 17 percent this year following a 46 percent plunge in 2014 driven by a collapse in oil, Russia’s biggest export. The currency has rebounded as Brent crude stabilized above $60 a barrel.
“The ruble rally was built on very shaky foundations,” William Jackson, an economist at Capital Economics Ltd. in London, said by phone. “If we see oil prices fall back, we could see the ruble decline once again.”
The Ibovespa retreated 1.3 percent in its second day of declines. Steelmaker Cia. Siderurgica Nacional SA slid 7.2 percent, leading a decline in Brazilian raw-material exporters as commodity prices fell.
The Shanghai Composite jumped 2.2 percent, capping a sixth straight weekly gain. Data showing China’s economy grew at the slowest pace in six years last quarter drove bets the government will cut interest rates, sending the stock gauge’s RSI to 83.2.
Emerging market stocks have risen 9 percent this year and sell for an average 12.5 times projected 12-month earnings, data compiled by Bloomberg show. That compares with a 3.5 percent gain in the MSCI World Index, which trades at a multiple of 16.9.
The premium investors demand to own emerging-market debt over U.S. Treasuries widened four points to 355 basis points, according to JPMorgan Chase & Co. indexes.