- Ruble, rand weaken as crude prices decline on supply outlook
- Energy companies lead decline in MSCI Emerging Markets Index
Emerging-market currencies fell to a two-week low and stocks retreated as falling commodity prices and a slide in Chinese shares refocused concern on slowing growth in the world’s second-largest economy.
A gauge tracking 20 developing-nation currencies weakened 0.6 percent, dropping for a fourth day. South Africa’s rand and Russia’s ruble slumped at least 1.4 percent against the dollar as oil prices retreated. The real fell for a second day on speculation Brazil will change this year’s budget target to a deficit from a surplus, underscoring its inability to shore up government finances. The Shanghai Composite Index slid from an eight-week high. Gazprom PJSC and other Russian companies paced declines among developing-country energy stocks.
“If local markets are weak in China, global investors get nervous," said Maarten-Jan Bakkum, a senior emerging-markets strategist at NN Investment Partners in The Hague, who prefers Indian and Philippine equities to shares in Brazil and Thailand. “China remains the main risk for developing countries."
Data out of China this week showed the economy grew at the slowest pace since 2009 in the third quarter, potentially damping the country’s demand for imports. Japan said imports tumbled more than 11 percent in September, following similarly weak data from Germany. The global growth concerns are putting a dent in a rally across emerging markets this month, spurred partly by waning bets for a Federal Reserve interest-rate cut this year.
The MSCI Emerging Markets Index decreased 0.6 percent to 859.10, paring this month’s advance to 8.5 percent. The Bloomberg Commodity Index fell 0.7 percent to the lowest level since Oct. 2.
The ruble dropped 1.4 percent to 63.0050 per dollar. Malaysia’s ringgit weakened for a fourth day before details of the nation’s budget are released on Friday, when Malayan Banking Bhd. says there’s a possibility Prime Minister Najib Razak will announce higher taxes to compensate for the loss of revenue from oil.
The real depreciated 0.9 percent against the dollar and the Ibovespa equity benchmark fell 0.1 percent. All four of Brazil’s largest newspapers now report that the government will revise this year’s budget target for a third time, forecasting a deficit excluding interest payments that may surpass 50 billion reais.
Saudi Arabian stocks slumped 2.7 percent, the most since August, after a string of disappointing earnings from the desert kingdom’s leading companies. Saudi Telecom Co., the nation’s biggest phone operator, lost 6.5 percent after reporting a 31 percent drop in third-quarter profit.
Stock indexes in Turkey and Dubai declined at least 0.9 percent. South Korea’s SK Hynix Inc. and Taiwan’s Inotera Memories Inc. sank more than 5 percent after Intel Corp. said it will invest as much as $5.5 billion to convert its China factory to produce memory chips.
All 10 industry groups in the MSCI Emerging Markets Index fell, led by a 1.4 percent retreat in the gauge of energy companies. Gazprom decreased 0.7 percent and Lukoil PJSC fell 0.9 percent. Transaero Airlines shares surged 187 percent after S7 Airlines co-owner Vladislav Filyov agreed to buy Russia’s second-largest carrier, improving its odds of survival after a bailout by state-run Aeroflot PJSC collapsed.
A 10 percent decline in the emerging-market index this year has taken its valuation to 11.2 times projected 12-month earnings, compared with a multiple of 15.6 for the MSCI World Index, according to data compiled by Bloomberg.
The premium investors demand to own emerging-market debt over U.S. Treasuries widened six basis points to 401 basis points, according to JPMorgan Chase & Co. indexes.