Emerging Stocks Snap Six-Day Advance on Europe, Growth Concerns
Emerging-market stocks fell, sending the benchmark index down for the first time in seven days, as Standard & Poor’s said it may downgrade the European Financial Stability Facility, fueling concern the region’s debt crisis will hurt the global economy.
The MSCI Emerging Markets Index (MXEF) lost 1.3 percent to 953.50. The Bovespa added 1.1 percent on speculation Brazil will act to boost growth after the economy stalled in the third quarter. The Hang Seng China Enterprises Index (HSCEI) retreated 1.5 percent after Fitch Ratings said a Chinese property-price correction will lead to worsening loan portfolios and Nomura Holdings Inc. cut its estimate for China’s economic growth next year. Russia’s Micex tumbled 4 percent.
The emerging markets measure pared losses of as much as 1.5 percent as the Bovespa rose and the Financial Times reported that European Union officials were in talks to increase the size of its rescue effort. S&P may cut the European Financial Stability Facility’s top credit rating if any of its guarantors have their debt grades cut, the company said. German Finance Minister Wolfgang Schaeuble said S&P’s warning will help force European leaders to redouble efforts to resolve the crisis.
“A slowing Europe is going to mean slowing emerging market economic growth,” Keith Springer, president of Springer Financial Advisors in Sacramento, California, said by phone. “When the developed world sneezes, the emerging markets catch cold.”
Most emerging market currencies fell against the dollar. The Russian ruble weakened 1.5 percent, the biggest decline among 25 emerging markets tracked by Bloomberg. Brazil’s real slipped 0.3 percent and the Czech koruna lost 0.2 percent.
The MSCI’s index of developing nations has lost 17 percent this year, more than the 6.7 percent slide for developed markets. Companies in the developing-nation index trade at 8.4 times estimated earnings, less than the 9.8 average for developed countries.
Brazil’s gross domestic product shrank 0.04 percent from the previous three months, the first contraction since 2009, as the country’s efforts to fight contagion from the European debt crisis fell short.
Cia. Hering, Brazil’s second-biggest clothing retailer, gained the most in seven weeks, adding 4.4 percent. Oil producer Petroleo Brasileiro SA gained 1.5 percent, following crude prices higher.
Poland’s KGHM Polska Miedz (KGH) SA, the copper miner with the largest European output, fell 8 percent after agreeing to acquire Canada’s Quadra FNX Mining Ltd. for about C$2.87 billion ($2.84 billion).
Chinese banks’ exposure to the property market is understated, Charlene Chu, head of China financial institutions at Fitch Ratings, told reporters on a teleconference yesterday. Nomura Holdings Inc. cut its estimate for China’s economic growth next year to 7.9 percent from 8.6 percent as investment in private housing slows and external demand weakens.
Industrial & Commercial Bank of China Ltd. (601398) dropped 1.2 percent in Hong Kong trading. Bank of China Ltd. (3988) sank 1.8 percent, its first loss in four days.
STX Pan Ocean Co. (028670), South Korea’s biggest bulk carrier, fell 4.5 percent, the most since Nov. 10, after the company said a leak was found in a ballast tank on an iron-ore transport vessel.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell eight basis points, or 0.08 percentage points, to 397, according to JPMorgan Chase & Co. (JPM)’s EMBI Global Index.
Indian markets were closed for a holiday.
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