Emerging Stocks Slump on China Concern as Crude Resumes Decline

  • Chinese shares drop as economic indicators signal slowdown
  • Oil falls as Iran Minister calls freeze proposal `ridiculous'

Emerging-market stocks fell from a six-week high as economic data signaled that China’s slowdown is deepening and the People’s Bank of China cut the yuan’s reference rate by the most in six weeks.

The Shanghai Composite Index decreased from a one-month high and the yuan depreciated for a third day. Brazilian stocks declined after a two-day rally that pushed the benchmark index’s valuation to the most expensive in three months. Shares in South Africa declined 1.4 percent. The S&P BSE Sensex Index ended a four-day advance in Mumbai as the budget session in parliament kicked off. Latin American currencies led a gauge of 20 developing-nation exchange rates lower.

A rally in emerging-market assets is easing after private gauges of Chinese manufacturing and services fell to new lows, a reading of business confidence slipped, and interest in small- and medium-sized businesses deteriorated. Brent crude slumped 4.1 percent after Iran’s oil minister panned as “ridiculous” Saudi Arabia and Russia’s agreement last week for producers to freeze output. It rallied to a three-week high Monday.

“The weakness today is just a bit of a set-back from the very strong oil, commodity currency and equity markets yesterday,” said Maarten-Jan Bakkum, a senior emerging-markets strategist at NN Investment Partners in The Hague, which has about $206 billion under management. “The slight weakening of the yuan explains some of the negative sentiment.”

The MSCI Emerging Markets Index fell 0.6 percent to 744.76. Nine of its 10 industry groups declined, led by consumer stocks. The MSCI benchmark has climbed 0.3 percent in February, trimming its drop in 2016 to 6.2 percent. Stocks on the gauge are trading at an average valuation of 10.9 times estimated 12-month earnings, compared with a multiple of 14.9 for the MSCI World Index of advanced-country shares.

The Ibovespa retreated 1.7 percent in Sao Paulo. Even with Tuesday’s decline, the Brazilian equity benchmark traded at a multiple of 10.7, near the highest valuation since late December.

Taiwan Semiconductor Manufacturing Co. was the biggest drag on the emerging-markets gauge, with a 1 percent decline. BHP Billiton Ltd. and Naspers Ltd. led shares lower in Johannesburg. Russian markets were closed for a national holiday.

India, Turkey

India’s Sensex lost 1.6 percent as HDFC Bank Ltd. and ICICI Bank Ltd. retreated at least 2.1 percent. The budget session of India’s parliament began and the government is due to unveil the nation’s railway budget and the economic survey, a summary of last year’s policy initiatives, later this week.

The Borsa Istanbul 100 Index added 0.8 percent, led by Turkiye Garanti Bankasi AS, following a 2.6 percent surge in the benchmark gauge on Monday. Bagfas Bandirma Gubre Fabrikalari AS, a Turkish fertilizer manufacturer, jumped 7 percent after 2015 profit beat estimates.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong fell 0.6 percent from a three-week high, while the Shanghai Composite Index dropped 0.8 percent.

Mexico’s peso weakened 0.7 percent against the dollar, leading developing-nation currencies lower. Brazil’s real fell 0.3 percent. South Korea’s won advanced for the first time in six days, gaining 0.3 percent. A Bloomberg gauge of 20 exchange rates slipped 0.4 percent from the highest level since Jan. 1.

The yuan fell less than 0.1 percent, according to China Foreign Exchange Trade System prices, after the PBOC lowered the daily reference rate for the yuan by 0.17 percent. The fix was weaker than most people had been forecasting, said Sue Trinh, the head of Asia foreign-exchange strategy at Royal Bank of Canada.

The premium investors demand to own emerging-market debt over U.S. Treasuries increased two basis points to 468, according to JPMorgan Chase & Co. indexes.

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