- Energy, raw-material companies fall the most in MSCI benchmark
- Brazil's real leads currencies lower amid political turmoil
Emerging-market stocks fell for the first time in three days, retreating from a nine-week high as a bigger-than-estimated slump in Chinese imports spurred concern that the slowdown in the world’s second-largest economy will curb global growth.
The MSCI Emerging Markets Index declined 1.3 percent to 854.29 in the steepest one-day drop since Sept. 23. China’s Cnooc Ltd. led energy companies lower, while South Africa’s Impala Platinum Holdings Ltd. was one of the biggest decliners among raw-material producers. The Hang Seng China Enterprises Index fell from a seven-week high. Brazil’s real led declines among currencies as tension escalated in a political standoff that’s contributing to the country’s economic slump.
“The headline Chinese import number was bad, once again, confirming that Chinese domestic demand continues to correct,” said Maarten-Jan Bakkum, a senior emerging-markets strategist at NN Investment Partners in The Hague. “This is relevant for emerging markets, as a weak China makes a wider emerging-market growth recovery almost impossible.”
China’s imports slumped for an 11th month in September to extend the longest decline in six years. Signs of further slowing in China rekindled concern over risks to the global economy following the steepest weekly gain in almost four years in developing-nation equities on bets the Federal Reserve won’t raise rates this year.
The developing-nation stock measure has fallen 11 percent this year and trades at 11.2 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has dropped 2.8 percent in the period and is valued at a multiple of 15.5.
All 10 industry groups in MSCI’s emerging-markets index slid, led by energy and commodity producers. Cnooc dropped 3.3 percent. Impala Platinum and Anglo American Platinum Ltd. each dropped at least 1 percent in Johannesburg as raw-material stocks halted a nine-day streak of gains.
The real weakened 3.5 percent against the dollar and the Ibovespa retreated 4 percent, halting a nine-day rally in Brazil, which lists China as its biggest trading partner. Economists predict the nation will log its longest recession since the Great Depression this year and next while president Dilma Rousseff is trying to shore up fiscal coffers to avoid additional credit-rating downgrades as her political opponents seek to impeach her.
The Hang Seng China Enterprises index lost 1 percent. China’s imports plunged 17.7 percent in yuan terms in September from a year earlier, widening from a 14.3 percent decrease in August. Exports fell 1.1 percent , compared with a 6.1 percent drop in August. The trade surplus was 376.2 billion yuan ($59.4 billion). The Shanghai Composite Index climbed 0.2 percent.
China will continue to rein in credit growth, reducing the investments in factories and machinery that have been among the key drivers for the commodity boom in recent years, Henry McVey, global head of macro and asset allocation at KKR & Co., one of the world’s largest private equity firms, wrote in a note posted on its website.
Equity markets in the Czech Republic, Hungary, Poland and Turkey slipped at least 0.5 percent. Russia’s benchmark Micex Index increased 0.6 percent.
The ruble, weakened 0.5 percent versus the dollar, trimming a gain this month that was spurred by rising oil prices and increased appetite for riskier emerging-market assets from global investors.
South Africa’s rand depreciated 1.6 percent against the greenback and the lira fell 1.1 percent. Federal Reserve Vice Chairman Stanley Fischer said over the weekend that the U.S. economy may be strong enough to merit a rise in borrowing costs this year. A Bloomberg gauge of 20 developing-nation currencies dropped 1.1 percent.
The premium investors demand to own emerging-market debt over U.S. Treasuries widened seven basis points to 404 basis points, according to JPMorgan Chase & Co. indexes.