Emerging Equities Post Worst Slump Since 2008 on Global Economy
An index of emerging-market stocks fell this week to post the longest string of weekly declines since 2008, led by energy companies, as concern that a global slowdown will crimp consumer demand weighs on commodities.
The MSCI Emerging Markets Index (MXEF) dropped 0.6 percent this week to 1,012.96, its seventh straight weekly slump. OAO Novatek (NVTK), Russia’s second-largest gas producer, sank 21 percent in London to lead weekly declines in the index, while OAO Novolipetsk Steel, Russia’s largest steelmaker by market value, fell to an almost three-year low. Moscow’s Micex (INDEXCF) Index slipped to a 2012 low, while Brazil’s Bovespa Index dropped 1.4 percent.
Economic reports from around the world this week have bolstered concerns the world is headed for recession, with Chinese and U.S. service-sector growth slowing and Europe’s jobless rate at a 15-year high. U.S. employers added fewer jobs than economists forecast last month, data today showed, aiding oil’s slump below $100 a barrel in New York for the first time since February. Metals prices slid in London.
“The data has turned really bad the last couple of weeks,” Neil Shearing, a senior emerging-markets analyst at Capital Economics Ltd. in London, said by phone today. “The weaker payroll data cautions investors and puts them in a wait- and-see mode for taking on risk.”
The MSCI Emerging Markets gauge has added 11 percent this year and trades for 10.5 times estimated earnings of member companies, data compiled by Bloomberg show. That compares with a multiple of 12.3 times for the MSCI World Index of developed countries, which has gained 7 percent in 2012.
The IShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF tracking developing-nation shares, fell 2.2 percent in the week to $41.36, the lowest level since April 10. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, rose 3.1 percent to 26.60.
Neither of Greece’s two major political parties that have supported the nation’s international bailouts -- New Democracy and Socialist Pasok -- will win an outright majority in May 6 elections, opinion polls show.
Francois Hollande, the Socialist challenger for the French presidency who is leading conservative incumbent Nicolas Sarkozy in polls, has called for a re-negotiation of the budget pact crafted by European leaders in March to stave off a repeat of the region’s debt crisis.
“Political uncertainty has twinned with economic unpredictability to create an even more uncertain backdrop for global markets as we move into late spring,” Chris Weafer, the chief strategist at Moscow-based Troika Dialog, Russia’s oldest investment bank, said in an e-mailed note to clients. “This combination is keeping investors wary of so-called risk assets.”
Novatek and OAO Mechel (MTLR), Russia’s biggest producer of coking coal, were the biggest decliners this week on the emerging markets stock gauge. American depositary receipts of Mechel (MTL) sank 15 percent to the weakest level since July 2009.
Eletropaulo Metropolitana Electricidade de Sao Paulo SA, the Brazilian unit of Arlington, Virgina-based power producer AES Corp., dropped 2.2 percent after reporting on May 3 that net income in the first quarter slid 61 percent from a year earlier.
The Micex tumbled 3.6 percent today, bringing its weekly drop to 2.1 percent. OAO Surgutneftegas sank 4.4 percent and OAO Gazprom Neft retreated 4.5 percent as crude oil fell below $1000 a barrel for the first time since February.
The Shanghai Composite Index (SHCOMP), which only traded over the last three days of the week because of holidays on April 30 and May 1, gained 2.3 percent, led by a 17 percent surge in Shanghai Construction Co. The Taiwan Stock Exchange (TWSE) advanced 3 percent in the week, the most since the beginning of February.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries climbed five basis points, or 0.05 percentage point, to 343 basis points today, according to JPMorgan Chase & Co.’s EMBI Global Index.
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