Emerging Stocks End Three-Day Advance Amid Shifting Fed Outlook

Updated on
Photographer: Daniel Roland/AFP via Getty Images

Emerging-market stocks slumped for the first time in four days as investors reduced bets that the Federal Reserve will move slowly in raising the near-zero U.S. interest rates that have bolstered demand for riskier assets.

The Shanghai Composite Index declined for a second day as 20 initial public offerings are due to come to market from Tuesday to Thursday, stoking concern that funds will be lured from existing stocks. Lender Itau Unibanco SA led Brazilian stocks lower. The real slumped for a second day as most developing-nation currencies weakened against the dollar. Egyptian equities rallied the most in the world as the government shelved a plan to tax investor profits.

Emerging-market assets have advanced this month as below-forecast U.S. economic figures prompted speculation that the Fed will push back planned interest-rate increases that threaten to dent appetite for riskier markets. Data this week may show increases in housing starts and manufacturing.

“It looks as though market expectations regarding a Fed rate hike are being pushed into 2016 already, but any one better data point out of the U.S. can turn that pretty quickly,” Simon Quijano-Evans, the head of emerging-market research at Commerzbank AG in London, said by e-mail. “A very ambiguous backdrop looks likely to continue, with markets generally on the cautious side.”

The MSCI Emerging Markets Index slipped 0.4 percent 1,039.70, reducing its quarterly advance to 6.7 percent, compared with a 3.8 percent increase in the period for the MSCI World Index of developed-country equities. Seven out of 10 industry groups dropped Monday, led by a 1.2 percent decline in telecommunications stocks.

Brazil, Russia

The Ibovespa fell 1.8 percent in Sao Paulo. Itau declined 2.7 percent.

Russia’s ruble advanced to a six-month high amid signs Russia’s recession isn’t as deep as forecast. The currency gained 0.9 percent against the dollar. The Micex Index declined 0.8 percent.

A gauge tracking 20 developing-nation currencies’ slipped 0.6 percent, the first decline in five days.

Investors added money to U.S. exchange-traded funds that invest in emerging markets for a ninth straight week, depositing $548.3 million through May 15, compared with $862 million in the previous period, according to data compiled by Bloomberg.

Egypt Taxes

Egyptian shares increased 6.5 percent, the the most since July 2013, as the government suspended implementation of a capital-gains tax for two years to protect the competitiveness of its financial markets, the state-run Middle East News Agency reported, citing Cabinet spokesman Hosam Alkaweesh. The rally trimmed quarterly losses to 3.7 percent.

The Shanghai Composite Index and the Hang Seng China Enterprises Index each fell 0.6 percent. China Mobile Ltd. sank the most in two months after the company announced plans to cut mobile data prices.

The liquidity lockup from IPO subscriptions -- which may reach 2.8 trillion yuan ($451.1 billion) -- will peak on May 20, China International Capital Corp. analysts wrote in a report last week.

“Markets are taking a hit as concerns continue to grow over the potential for new Chinese share sales,” said Patrick Mitchell, head of institutional sales at Ho Chi Minh City-based VinaSecurities JSC.

Hon Hai Precision Industry Co., a maker of Apple Inc. iPhones, surged 4 percent in Taipei after its profit beat estimates. Vietnam’s VN Index tumbled 1.6 percent to the lowest level since Dec. 19, dragged down by a 4.9 percent slump in PetroVietnam Gas Joint-Stock Co. The S&P BSE Sensex Index advanced 1.3 percent as Tata Power Co., the biggest non-state generator, rose to a two-week high.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE