Emerging Stocks Fall to 2-Week Low on Growth Concerns
Emerging-market stocks fell for a seventh day on concern the global economic slowdown is worsening after South Korea unexpectedly cut interest rates and Infosys (INFO) Ltd. reported profit that missed estimates.
Infosys, India’s second-largest software exporter, plunged 9.1 percent, leading a drop by technology stocks, after the company cut its sales forecast. South Korea’s Kospi index slid 2.2 percent, the most among emerging-market benchmark gauges, and the won weakened after the surprise rate cut raised concerns growth is deteriorating. Hyundai Motor Co. and Kia Motors Corp. (000270) slid to a four-month low in Seoul on labor protests.
The MSCI Emerging Markets Index (MXEF) sank 1.7 percent to 916.86 as of 3:03 p.m. in Hong Kong, poised for its steepest decline since June 21. The measure is headed for the longest losing streak since the seven days through Nov. 23. South Korea and Brazil have cut interest rates while minutes of the Federal Reserve policy makers’ June meeting indicated the possibility of more stimulus. The Bank of Japan altered its stimulus program without adding extra money. A report due tomorrow is expected to show China’s economy grew at the slowest pace in three years in the second quarter.
“While central banks are taking steps to help avert a further slowdown in growth, investors aren’t reacting positively because they think lowering the rate alone won’t resolve problems markets are facing,” Kim Jae Dong, the head of equity at SEI Asset Korea Co., which manages about $5.3 billion in assets, said by phone today. “What they want is more drastic fiscal measures that could actually spur companies to spend and increase people’s disposable income.”
The MSCI Emerging Markets gauge has pared gains to 0.4 percent this year, compared with a 2.8 percent gain in the MSCI World Index. Shares in the emerging-markets index are trading at 10 times estimated earnings, compared with the MSCI World’s multiple of 12.2 times, according to data compiled by Bloomberg.
The benchmark Micex Index (INDEXCF) lost 1.2 percent in Moscow, with all but one of the gauge’s 30 stocks falling. Benchmark indexes fell 0.3 percent in South Africa, 0.5 percent in Turkey and 0.9 percent in Hungary.
The Bank of Korea unexpectedly lowered the benchmark seven- day repurchase rate by 25 basis points to 3 percent, the first cut since February 2009, the central bank said in a statement in Seoul today. Two of 16 economists surveyed by Bloomberg predicted the move while the rest forecast no change.
South Korea’s government bonds jumped, pushing yields to record lows after the rate cut. The rand fell to its lowest level this month as bond yields dropped to records on speculation South Africa’s central bank will follow Brazil and Korea in cutting interest rates to stimulate growth.
Asian economies will expand less than previously forecast this year, the Asian Development Bank said, as Europe’s debt turmoil crimps growth from China to India.
Asia excluding Japan will expand 6.6 percent this year compared with an April estimate of 6.9 percent, ADB President Haruhiko Kuroda said in a briefing in Bangkok today. Growth will be 7.1 percent in 2013, compared with a previous forecast of 7.3 percent, he said.
China’s economy may have expanded 7.7 percent in the second quarter, the slowest pace in three years, according to the median estimate of 35 economists surveyed by Bloomberg. That compares with an 8.1 percent increase in the first quarter and the government’s target for full-year growth of 7.5 percent.
China’s Shanghai Composite Index rose 0.6 percent, erasing an earlier loss, as equity valuations near a three-month low overshadowed concern that earnings growth is slowing.
Tech Stocks Slump
The Hang Seng China Enterprise Index (HSCEI) of mainland companies listed in Hong Kong tumbled 1.7 percent, headed for the lowest close since Oct. 20. Bank of Communications Co. led losses among Chinese lenders in the gauge, falling 3 percent to HK$4.82, bound for its lowest close since Nov. 25. China Merchants Bank Co. dropped 2.9 percent, while China Construction Bank Corp. (939) declined 2.8 percent.
A gauge of technology companies fell 3 percent and led declines among all 10 industry groups in the MSCI Emerging Markets Index. The consumer discretionary index dropped 2 percent, the biggest slide since May 23.
Infosys plunged to the lowest level since Sept. 13. Sales in the year ending in March may rise to at least $7.34 billion, Infosys said in a statement today, lower than the $7.55 billion it forecast in April. It reported today first-quarter net income of 22.9 billion rupees ($412 million), which is lower than the 24.2 billion rupee median estimate of 31 analysts compiled by Bloomberg. The BSE India Sensitive Index (SENSEX) lost 1.3 percent.
Global personal-computer shipments stalled in the second quarter, falling 0.1 percent to 87.5 million units, a seventh straight period of weak growth, amid economic weakness in Europe and waning demand for PCs in favor of tablets, market-research firm Gartner Inc. said in a statement yesterday.
Hyundai Motor (005380) dropped 3.1 percent, headed for the lowest close since March 12. Kia Motors lost 1.2 percent, bound for its lowest close since March 23. Workers at the companies authorized their South Korean union leaders to stage their first strike in years to demand higher wages and reduced working hours.
China Yongda Automobile Services Holdings Ltd., the nation’s biggest distributor of BMWs, fell 0.3 percent on its first day of trading after the company scaled back its initial public offering.
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