Emerging-Market Stocks Reduce Weekly Gain as Crude Rally Fades

  • Telecom shares retreat as MTN Group plunges in Johannesburg
  • Sentiment in market is `shifting again,' Amiya Capital Says

Emerging-market equities pared their first weekly gain this month as oil prices dropped and Africa’s biggest wireless phone company reported a 20 percent decline in earnings.

A gauge of developing-nation energy stocks dropped from six-week high
as Brent crude fell 3.7 percent on signs a global supply glut is persisting. MTN Group Ltd. plunged the most since 1998 in Johannesburg after the loss of the company’s Nigerian business hurt earnings. A Bloomberg gauge of 20 developing-nation exchange rates fell for a second day.

A rally in developing-nation assets came to a halt Friday after data showed U.S. energy stockpiles at the highest level in more than eight decades. The report reduced speculation that emerging markets may be poised for a turnaround as two of the world’s biggest oil producers agreed to freeze output and central bank policy makers in the U.S., Mexico and China moved to bolster confidence in their economies.

“Sentiment toward emerging markets is shifting again,” said Michael Wang, a strategist at hedge fund Amiya Capital in London. Emerging-market “stocks partly rallied on the news that OPEC could be cutting production, but that seems less likely now and the buildup in oil inventories is hurting oil and commodity related plays,” he said.

The MSCI Emerging Markets Index fell 0.7 percent to 740.98, cutting its weekly gain to 4.2 percent. The benchmark gauge has declined 6.7 percent this year and trades at 10.9 times the projected 12-month earnings of its member stocks. That compares with a multiple of 14.9 for developed-nation equities, which have fallen 7.5 percent in 2016.

MTN Plunges

The Bloomberg developing-nation currency gauge slipped less than 0.1 percent, narrowing its advance for the week to 0.3 percent. The premium investors demand to own emerging-country debt over U.S. Treasuries declined one basis point to 472 on Friday.

MTN shares sank 18 percent, the most since Aug. 1998. MTN blamed the drop in earnings on a loss of business in Nigeria, where regulators withheld services and forced the company to cut off 5.1 million customers. The company is locked in discussions with the Nigerian government over the $3.9 billion fine imposed after the wireless operator missed a deadline to disconnect the unregistered subscribers.

Russia, Brazil

Lukoil PJSC retreated 1 percent as the Micex Index fell for the first time in six days in Moscow. Equity gauges across emerging Europe sank, with Polish and Czech stocks falling 0.8 percent and Turkish equities retreating 0.6 percent. The Ibovespa gained 0.2 percent on renewed speculation that President Dilma Rousseff could be ousted from power, clearing the way for new government that would focus on restoring growth and showing up the budget.

PT Bank Rakyat Indonesia declined 4.6 percent, the most in a month as the government, Financial Services Authority and Bank Indonesia planned to coordinate to reduce banks’ rates. The Jakarta Composite Index slid 1.7 percent.

The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong fell 0.7 percent, paring its weekly rally to 8.1 percent. The Shanghai Composite Index remained among world’s worst performers this year even after it advanced 3.5 percent this week.

Russia’s ruble weakened 1.1 percent. Malaysia’s ringgit dropped 0.9 percent. Brazil’s real strengthened 0.2 percent.

Policy makers in South Korea warned the currency’s movement has been “excessive” and that they will take any necessary action to curb volatility that has driven it to the lowest level in more than five years. The won retreated 0.5 percent on Friday.

The Hungarian forint and Poland’s zloty each advanced more than 0.4 percent against the euro.

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