Emerging Stocks Fall on Europe Concern, Ratings Downgrade
Emerging-market stocks fell, dragging down the benchmark index from a two-week high, as concern about Europe’s debt crisis and a downgrade of Spanish lenders by Fitch Ratings crimped demand for riskier assets.
The MSCI Emerging Markets Index (MXEF) fell 0.2 percent to 913.00 at the close in New York, after yesterday closing at the highest level since May 29. Information technology stocks led declines on the index as Samsung Electronics Co. (005930), which got 16 percent of its first-quarter revenue from Europe, fell from the highest in almost a month. Brazilian equities rallied on speculation of further stimulus from the Federal Reserve.
Spain’s benchmark 10-year sovereign-debt climbed to a euro- era record as optimism faded that the 100 billion euro ($124.8 billion) bank bailout for Spain would contain the debt crisis. Fitch Ratings said euro-area countries face lower ratings because policy makers are failing to demonstrate they can bring the debt crisis under control.
“The European debt crisis is the biggest risk to the stock market now and will cut investors’ risk appetite,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “It looks like the problem is spreading to bigger countries such as Spain and Italy, which is the last thing investors want to see.”
The MSCI Emerging Markets gauge of developing nations has declined 0.4 percent in 2012 and trades at a multiple of 9.9 times estimated earnings, compared with 11.8 percent for a developed-nation gauge, which has added 0.8 percent this year.
Nine of 10 industry groups on the emerging-markets gauge fell, with technology and industrial stocks leading declines. Telecommunication services advanced.
Federal Reserve Bank of Chicago President Charles Evans said he would support a variety of measures to generate faster job growth, underscoring his preference for more stimulus in the world’s largest economy. The Fed meets next week and announces its rate decision on June 20.
“I’ve been in favor of pretty much any accommodative policy I’ve heard about,” Evans said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu airing today. “More asset purchases would be useful. More mortgage- backed securities purchases would be good.”
Brazil’s Bovespa added 1.9 percent in Sao Paulo, the highest since May 28. Airline operator Tam SA (TAMM4), whose shares added 6.8 percent, the most since Oct. 5, led the advance. Tam’s acquisition by Lan Airlines SA is creating the world’s most valuable carrier with a leading position in Brazil.
Ultrapar Participacoes S.A. was the second-biggest gainer after the holding company’s shares added 5 percent, the most in two months.
The Czech PX stock index fell 1 percent on its third day of declines. The euro area is the biggest buyer of Czech exports. The ISE National 100 Index (XU100) advanced 1.2 percent in Istanbul and Hungary’s BUX Index (BUX) gained 0.6 percent. Poland’s WIG20 Index jumped 2.2 percent, advancing for a fourth day. Markets in Russia are shut for a holiday.
The Jakarta Composite Index declined 0.4 percent on losses for PT Bumi Resources, Asia’s biggest exporter of power-station coal. The shares fell 4 percent as Societe Generale SA cut its forecasts for coal prices, citing “poor performance” in the global economy and a slowdown in energy demand in emerging markets.
Avusa Ltd. (AVU), publisher of South Africa’s biggest Sunday newspaper, jumped 8.8 percent after investment company Mvelaphanda Group Ltd. offered to buy the shares in the company it doesn’t already own.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong fell 0.6 percent, even after China’s local- currency lending rose last month to a record for May. The loans totaled 793.2 billion yuan ($125 billion), the central bank said yesterday, beating the 700 billion yuan median forecast in a Bloomberg survey. Europe is China’s biggest export market, according to data from Shenyin & Wanguo Securities Co.
Samsung Electronics dropped 1 percent, while Taiwan Semiconductor Manufacturing Co. lost 1.2 percent. China Shipping Container Lines Co Ltd. (2866) retreated 4.7 percent in Hong Kong trading, and China Cosco Holdings Co. fell 4.2 percent.
Taiwan Glass Industry Corp. (1802) slumped 5.1 percent to the lowest level in almost two years. The glassmaker’s second-half outlook is “weak,” Parker Wu, a fund manager at Agriculture Bank of Taiwan, said by phone today.
China Southern Airlines Co. (1055), Asia’s biggest carrier by passengers, rallied 6.7 percent after announcing plans to raise as much as 2 billion yuan selling new shares to its state-owned parent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 11 basis points, or 0.11 percentage point, to 390, according to JPMorgan Chase & Co.’s EMBI Global Index.