Most Emerging Stocks Fall Decline China Economy Concern
Emerging-market stocks sank to a 16- week low, led by Indian and Mexican companies, as commodities fell amid concerns Greece’s struggle to form a new government will worsen Europe’s debt crisis and crimp demand for resources.
The MSCI Emerging Markets Index (MXEF) dropped 0.9 percent to 992.55 at the end of trading in New York, the lowest closing level since Jan. 19. Mexico’s benchmark IPC (MEXBOL) index retreated 2.1 percent as America Movil SAB (AMXL) tumbled the most since 2008 on plans to purchase a stake in Dutch phone company Royal KPN NV. (KPN) The BSE India Sensitive Index (SENSEX) slid 2.2 percent, the most since March 22. Tata Consultancy Services, India’s largest computer service provider, slid the most in six months.
Greece’s New Democracy leader Antonis Samaras said he failed to form a coalition government following the weekend election, while French President Nicolas Sarkozy, German Chancellor Angela Merkel’s preferred partner for enforcing debt reductions, was defeated by Socialist Francois Hollande.
“The market is trying to make up its mind whether what we saw in France and in particular in Greece is a real threat to financial stability,” Lars Christensen, chief emerging-market analyst at Danske Bank A/S in Copenhagen, said by phone.
America Movil plunged 8.2 percent as analysts at Corp. Actinver, Banco BTG Pactual and Scotia Capital cut their rating on the stock after the largest wireless carrier in the Americas made a 2.6 billion-euro ($3.4 billion) offer for a stake in KPN NV. Actinver analyst Martin Lara said KPN’s fundamentals “seem weak.”
Vale SA (VALE3), the world’s largest iron-ore producer, dropped 2.5 percent to its lowest since Jan. 16 as Brazil’s Bovespa (IBOV) index slipped 1.4 percent. The Standard & Poor’s GSCI Total Return Index of commodities fell 0.6 percent as oil dropped for a fifth day. Crude for June delivery declined 1 percent to $97.01 a barrel on the New York Mercantile Exchange.
“There’s a lot more worries about growth and what’s going on in Europe which is dragging down commodities, which has a big impact on emerging markets,” Greg Lesko, who manages $700 million at Deltec Asset Management in New York, said in a phone interview. “It’s not an emerging-market economic situation as much as concern about what’s going on outside of the emerging world.”
Tata Consultancy slid after U.S.-based Cognizant Technology Solutions Corp. lowered its earnings growth forecast.
Cognizant, which has three-quarters of its employees based in India and competes with local software makers for business, fell the most in more than four years in U.S. trading yesterday after a slowdown in corporate spending forced the company to trim full-year growth forecasts. Indian software exporters get about 80 percent of their sales from abroad.
China Land Sales
Poly (Hong Kong) Investments Ltd., which develops real estate in China, fell 3.7 percent. A report showing a collapse in residential land sales in major cities raised concern China’s economy will slow further after growth eased more than forecast last quarter to the slowest pace in almost three years.
A total of 60,000 square meters of residential land were sold in 20 major Chinese cities from April 30 to May 6, a drop of 92 percent from the previous week, SouFun Holdings Ltd. said in an e-mailed statement yesterday.
The Shanghai Composite Index (SHCOMP) retreated 0.1 percent.
The FTSE/JSE Africa All Shares Index (JALSH) retreated 1.2 percent in Johannesburg as gold and copper prices fell. The WIG20 Index (WIG20) slid 2.2 percent in Poland, which sends most of its exports to the euro region. Bank Pekao SA (PEO), a unit of UniCredit SpA, fell 3 percent. The BUX Index (BUX) retreated 1.4 percent in Hungary.
Turkey’s ISE National 100 Index (XU100) slipped 0.1 percent while the Micex Index dropped 0.1 percent in Moscow.
The rand depreciated 1.1 percent against the dollar and the lira weakened 0.9 percent. The zloty fell 0.6 percent against the euro.
The Kospi Index (KOSPI) gained 0.5 percent in Seoul. Posco (005490), South Korea’s biggest steelmaker, rose 2.6 percent, the most since Jan. 19. The company’s second-quarter earnings will probably exceed consensus estimates, Meritz Securities Co. wrote in a report today.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose four basis points, or 0.04 percentage point, to 350, according to JPMorgan Chase & Co.’s EMBI Global Index.
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