Emerging-market stocks pared the biggest monthly gain since 2012 as the Federal Reserve left open the prospect of higher borrowing costs and profit at China’s largest bank missed estimates. The ruble depreciated after Russia lowered rates more than forecast.
Industrial & Commercial Bank of China Ltd. paced declines among Chinese banks traded in Hong Kong. The ruble dropped 1.2 percent following a central bank decision to cut its key interest rate by 150 basis points to 12.5 percent. Equities in Turkey slid 2.4 percent, while Brazil’s Ibovespa added 0.8 percent.
The MSCI Emerging Markets Index decreased 1.1 percent to 1,047.78, trimming an advance in April to 7.5 percent. The Fed repeated its view that U.S. growth will rebound to a “moderate pace,” damping speculation it may delay its first rate increase since 2006 until next year. China’s five big banks are at risk of their weakest full-year profit growth since at least 2004.
A pullback after a rally “in emerging-market equities shouldn’t be a surprise, especially when there is still debate as to the timing of the Fed’s move,” Daniel Salter, head of equity strategy at Renaissance Capital in London, said by e-mail.
The developing-nation gauge has risen 9.6 percent this year and trades at 12.5 times its projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index of developed-nation equities has climbed 4 percent in the period, and is valued at a multiple of 16.8.
Russia’s Micex Index advanced 1 percent. The ruble, which fell to 51.6119 versus the dollar on Thursday, extending the biggest monthly rally since 1993, buoyed by a cease-fire in Ukraine and a revival in the price of oil, Russia’s main export earner.
The Bank of Russia is accelerating its pace of easing with a third reduction this year as it unwinds December’s emergency increase to 17 percent.
Turkey’s equities capped the steepest drop since March 10. Saudi Arabia’s Tadawul All Share Index gained 0.2 percent in the third day of advances. The South African rand fell 1.2 percent, snapping five-day appreciation.
All 10 industry groups in the MSCI emerging-market stock index dropped, led by telecommunication and utility companies.
The Hang Seng China Enterprises Index of Hong Kong-listed Chinese companies slid 1.2 percent, capping a three-day loss. ICBC decreased 1.9 percent after reporting an advance in first-quarter net income to 74.3 billion yuan ($12 billion). That compared with the 75.4 billion yuan median estimate of four analysts surveyed by Bloomberg.
Bank of China Ltd. fell 3.6 percent after its quarterly earnings also missed estimates. China Construction Bank Corp. lost 1.8 percent. The Shanghai Composite Index declined 0.8 percent.
“Chinese bank results showed very limited earning growth,” Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki, said by e-mail. “This is not really a surprise, but probably a trigger for profit taking.”
Housing Development Finance Corp., India’s biggest mortgage lender, fell to a three-month low in the biggest drag on India’s S&P BSE Sensex. The gauge slid 0.8 percent and posted a second month of losses.