Emerging-market stocks fell for a second day as the resumption of trading in suspended Chinese shares led to a rout in Shanghai and the Federal Reserve signaled that it is on track to increase U.S. interest rates this year.
The MSCI Emerging Markets Index slipped 0.3 percent to 937.98. China’s equity benchmark slid 3 percent as at least 1,240 shares in the country declined by their 10 percent daily limit. Russian stocks fell as preferred shares of OAO Surgutneftegas traded without dividend rights. A gauge of 20 developing-nation currencies dropped 0.4 percent.
Chinese stock gains sparked by government intervention are reversing as companies end the suspension of their shares after the recent meltdown. The Shanghai Composite Index sank 32 percent from June 12 through July 8 as investors bet valuations are unsustainable. As many as 701 stocks remain halted. Suspensions and trading limits have locked sellers out of 67 percent of the market. The benchmark fell Wednesday even as data showed stronger economic growth than forecast.
“Emerging-market stocks are ignoring the China data,” Michael Wang, a London-based strategist at Amiya Capital LLP, said by e-mail. “The Chinese market had gone up three days in a row. So I did expect some profit-taking as the deleveraging from margin financing is still not done.”
China’s gross domestic product expanded 7 percent from a year earlier in the second quarter, beating estimates for a 6.8 percent increase. Greek Prime Minister Alexis Tsipras is braving a revolt in his own party as parliament in Athens debates a bailout of up to 86 billion euros ($95 billion).
Fed Chair Janet Yellen said prospects are good for further improvement in the U.S. labor market and the world’s largest economy, keeping the central bank on track for an interest-rate increase in 2015. In a testimony prepared for delivery before the House Financial Services Committee in Washington, Yellen reiterated that the timing of the first rate rise in almost a decade is less important than the subsequent path of increases, which she said would be gradual.
In China, the three-day, 13 percent stocks rebound through July 13 may have run its course and come under pressure from shares ending their trading halts, Qian Qimin, an analyst at Shenwan Hongyuan Group, said. Better-than-estimated economic data reduces the chance of more monetary-policy support, according to Michael Every, the head of financial markets research at Rabobank Group in Hong Kong.
The Shanghai Composite Index fell, taking its two-day loss to 4.2 percent.
The Ibovespa retreated 0.6 percent as lender Itau Unibanco Holding SA slumped 1.7 percent to a one-month low. A visit to Brazil by officials from Moody’s Investors Service raised the specter of a credit-rating cut for Latin America’s largest economy, sending stocks lower.
Seven out of 10 industry groups in the emerging-markets gauge dropped, led by industrial and financial shares. The index has slid 1.9 percent this year and trades at 11.5 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index of advanced-nation shares has risen 3.4 percent in 2015 and is valued at a multiple of 16.4.
Daewoo Shipbuilding & Marine Engineering Co. the world’s second-largest shipbuilder, plunged 30 percent in Seoul. The company may seek a voluntary debt restructuring, Yonhap Infomax reported Wednesday, citing unidentified government officials and creditors.
Russia’s Micex Index lost 0.4 percent and the dollar-denominated RTS Index slid 1.1 percent. The gauges have rallied at least 15 percent this year.
The premium investors demand to own emerging-market debt over U.S. Treasuries widened five basis points to 350 basis points, according to JPMorgan Chase & Co. indexes.