Emerging-market stocks fell to a seven-week low as Chinese shares slid for the first time in eight days after brokerages curbed margin lending.
The MSCI Emerging Markets Index retreated 0.9 percent to 1,009.52. Shanghai-listed stocks slumped the most since mid-January. Brazil’s equity benchmark declined as lenders slid after data showed faster-than-forecast inflation. Qatar’s benchmark tumbled the most this year as the country’s soccer World Cup plans came under scrutiny. A gauge of developing-nation currencies slid for a ninth day, the longest streak of declines in more than two months.
Speculation that the U.S. is moving closer to an interest-rate increase has pushed the MSCI developing-nation stock gauge down 2.7 percent in the last four days. The index’s price as a multiple of its members’ projected earnings reached 12.8 last month, the highest level since 2010.
“The two culprits are: one, a pickup in the U.S. economic data which has led to rising bond yields and a stronger dollar, and two, a pickup in Chinese IPOs and a crack-down on margin lending by the Chinese authorities,” Michael Wang, a London-based strategist at hedge fund Amiya Capital LLP said by e-mail. “Valuations in emerging markets were starting to look stretched.”
The developing-nation index has risen 5.4 percent this year and its valuation multiple has slipped to 12.1, data compiled by Bloomberg show. The MSCI World Index has gained 4.8 percent in 2015 and trades at 16.8 times projected earnings.
The Shanghai Composite Index slumped 6.5 percent, ending a 15 percent rally. Citic Securities Co. sank 9.4 percent after several rivals increased their margin requirement, the collateral put up by an investor when borrowing. Changjiang Securities Co. dropped 9.5 percent after joining competitors in the move. China Construction Bank Corp. lost 3.7 percent as the Hang Seng China Enterprises Index slid 3.5 percent.
Record growth in margin debt helped fuel a 127 percent gain in the Shanghai index over the past year, the most among global gauges tracked by Bloomberg. Margin lending by Chinese brokerages exceeded 2 trillion yuan ($322 billion) as of May 27, five times the level of a year earlier, exchange data showed.
Lender Itau Unibanco Holding SA slumped 1.2 percent, leading a 0.4 percent drop in the Ibovespa. Brazilian wholesale, consumer and construction prices, as measured by the IGP-M index, rose 4.11 percent in the 12 months through May, compared with an average estimate of 4.08 percent among economists surveyed by Bloomberg.
The ruble weakened 1.1 percent to 52.899 per dollar, a five-week low. The correlation between the ruble and oil prices increased to the highest level in 20 months as a series of Russian rate cuts and central-bank currency purchases damped the currency’s carry-trade appeal. The Micex Index gained 0.2 percent, while the dollar-denominated RTS Index dropped 2.1 percent.
The lira retreated 0.5 percent in its sixth day of losses. Turkey is scheduled to hold general elections on June 7. The Bloomberg gauge of 20 emerging-market currencies declined 0.4 percent.
Qatar stocks fell 2.7 percent, extending Wednesday’s 1.5 percent drop, as indictments of FIFA officials and a Swiss probe cast renewed scrutiny over the nation’s bid to host the 2022 soccer World Cup.
The premium investors demand to own emerging-market debt over U.S. Treasuries widened one basis point to 339 basis points, according to JPMorgan Chase & Co. indexes.