Emerging-market stocks fell to an 11-week low, led by Chinese shares, as investors awaited the Federal Reserve’s decision on monetary policy and weighed the prospects for a break in the deadlock between Greece and its creditors.
The Shanghai Composite Index tumbled 3.5 percent amid concern a flood of share sales will drain liquidity, while a gauge of mainland shares in Hong Kong entered a correction. Samsung Electronics Co. dropped to the lowest since November as South Korea’s Kospi Index slid 0.7 percent. South Africa’s benchmark fell for a third day. Brazilian lenders led a 1.1 percent gain in the Ibovespa as investors bought shares near the cheapest valuations since 2009.
The MSCI Emerging Markets Index slipped 0.5 percent to 965.35. The Fed started a two-day policy meeting Tuesday that may offer clues on the timing of U.S. interest-rate increases. Greece has no plans to present new proposals at a meeting of European finance ministers this week to unlock aid, Greek Finance Minister Yanis Varoufakis told Bild newspaper.
“Emerging markets are clearly nervous about what is going to happen with Greece because we haven’t been here before in Europe, one of the main trading partners for EM countries,” Simon Quijano-Evans, head of emerging-market research at Commerzbank AG in London.
The developing-nation measure has risen 0.9 percent this year and trades at 11.7 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 3.2 percent in 2015 and is valued at a multiple of 16.4.
Samsung slumped 1.2 percent. The Kospi Index retreated for a third day.
Equities in Hungary decreased 0.1 percent, while the WIG 20 Index in Poland also declined 0.1 percent. Prime Minister Ewa Kopacz announced replacements for three ministers she forced out last week as the ruling party seeks to stem a plunge in its support before general elections in October. The FTSE/JSE Africa All Shares Index slumped 1 percent in Johannesburg.
Itau Unibanco Holding SA led gains in Sao Paulo, rising 3.5 percent. Lenders advanced as stocks in the MSCI Brazil/Financials Index traded near the lowest valuations since 2009. Russia’s Micex Index added 0.7 percent, rising for a second day after policy makers reduced the country’s key interest rate.
Eight out of 10 industry groups in MSCI’s developing-nation gauge fell Tuesday, led by a 1.5 percent decline in industrial stocks.
The Shanghai Composite capped the biggest two-day loss this month. The gauge trades near a five-year high of 19 times estimated earnings, below the level of 36 reached during the 2007 bubble. Benchmark money-market rates surged to a five-week high before 25 initial public offerings that may divert the most funds since IPOs resumed in January 2014.
Subscriptions for 25 upcoming IPOs may tie up 6.68 trillion yuan ($1.08 trillion) of liquidity starting Wednesday, according to a Bloomberg survey. The Hang Seng China Enterprises Index dropped 2.7 percent, taking declines from a May 26 high to 10 percent.
The premium investors demand to hold emerging-market debt over U.S. Treasuries widened six basis points to 357 basis points, according to JPMorgan Chase & Co. indexes.