Emerging Stocks Extend Weekly Loss on Europe Concern
Emerging-market stocks extended a weekly decline, after posting the biggest slump since May last month, as a European minister said Greece’s bailout may be delayed and India’s Oil & Natural Gas Corp. (ONGC) posted its biggest profit drop in four years.
The MSCI Emerging Markets Index lost 0.4 percent to 990.98 at the close of trading in New York. The gauge declined 1.4 percent this week after dropping 0.7 percent in October. Oil & Natural Gas, India’s biggest energy explorer, helped send a gauge of energy stocks to a two-month low. OAO Mobile TeleSystems, Russia’s largest mobile-services operator, sank the most in two weeks after an Uzbek court demanded payment of a $600 million fine.
Euro-area finance chiefs won’t make the call to release new aid for Greece that has been when they meet on Nov. 12, a European Union official said yesterday. Finnish Finance Minister Jutta Urpilainen said today European finance ministers’ hands are tied on deciding on new aid payments until officials file a report. Concern is also mounting as a re-elected President Barack Obama faces a so-called fiscal cliff.
“Europe is back in the headlines,” Michael Gayed, chief investment strategist at Pension Partners LLC and fund manager of the ATAC Inflation Rotation Fund, said by phone from New York. The Greek vote and U.S. election changed “sentiment this week, and that’s making for a very sour mood” for emerging markets, he said.
The Standard & Poor’s 500 Index capped the biggest weekly decline since June 1 amid concern over the so-called fiscal cliff, tax increases and federal spending cuts set to kick in automatically unless Congress acts. Countries in the MSCI index send about 17 percent of their exports to the U.S. on average, according to the World Trade Organization.
In his first public remarks on the budget and deficit since winning re-election on Nov. 6, Obama said today he was “open to compromise” on budget negotiations and reiterated that a solution must include spending cuts and raising revenue, including raising taxes on the wealthiest.
Finance chiefs from the euro region won’t make the call to release 31.5 billion euros ($40 billion) of aid for Greece when they meet next week, a European Union official said yesterday on condition of anonymity because the deliberations are private. Urpilainen said European ministers won’t be able to decide on new aid payments until the troika, a group of officials from the European Central Bank, the International Monetary Fund and the European Commission, files a report assessing how Greece is complying with the terms of its second bailout.
The iShares MSCI Emerging Markets Index (MXEF) exchange-traded fund, the ETF tracking developing-nation shares, gained 0.2 percent today, paring its weekly drop to 1.4 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slid 1.6 percent.
Fifty-seven percent of MSCI Emerging Markets Index companies have reported quarterly profit that missed forecasts since the end of September, according to data on corporate results compiled by Bloomberg.
Brazilian utility shares posted a sixth day of declines, the longest streak in almost a year. Turkish Airlines slumped 3.7 percent in Istanbul after the government asked advisers to prepare a plan by the end of the year for a possible sale of its stake, according to three people with direct knowledge of the matter.
South Africa’s FTSE/JSE Africa All Share Index (JALSH) fell lost percent, the most in more than two weeks. Lonmin Plc (LON), the world’s third-largest platinum producer, sank 3.2 percent in Johannesburg to the lowest level since 1999, after reporting a loss as a strike in South Africa hurt output.
Russia’s Micex Index (INDEXCF) retreated 0.5 percent for the lowest close since Aug. 2, as the central bank kept its refinancing rate at the highest since December. MTS, the country’s largest mobile operator, fell 2 percent, the most in two weeks, as Russia’s largest mobile-phone operator seeks to restore its licenses in Uzbekistan after a court overturned a decision to confiscate the company’s assets in the ex-Soviet republic.
Brazil’s Bovespa dropped 0.3 percent as utility Centrais Eletricas Brasileiras SA tumbled 2.7 percent, adding to its biggest weekly slide since December 2004. Mexico’s IPC index fell 0.4 percent, with telecommunications company America Movil SAB de C.V. sliding 0.7 percent to the lowest level since April.
South Korea’s Kospi index fell 0.5 percent and the Hang Seng China Enterprises Index of mainland companies declined 0.7 percent, its lowest close since Oct. 26. South Korea’s bonds reversed gains as the central bank said the economy will show “moderate” improvement after holding borrowing costs. Turkey’s benchmark two-year yield fell for the fifth day to a record low.
China’s Shanghai Composite Index (SHCOMP) slipped 0.1 percent, declining for a fifth day, the longest losing streak since June. Equity trading volumes for index-listed shares were 20 percent lower than the 30-day average, data compiled by Bloomberg show.
Eight of the ten sector groups of the emerging markets gauge declined, led by utility and telecommunications stocks. The MSCI Emerging Markets Index has climbed 8.1 percent this year, compared with a 7.9 percent increase in the MSCI World Index. Emerging-nation shares trade at 11.3 times estimated earnings, compared with the MSCI World’s 13.1 times, according to data compiled by Bloomberg.
Global equities lured fewer funds in the week through Nov. 7 as North American funds recorded $1.5 billion of outflows, according to a weekly Citigroup Inc. (C) report citing data compiled by EPFR Global.
India’s Oil & Natural Gas tumbled 3.1 percent, its lowest close since June 11. Net income dropped 32 percent to 59 billion rupees ($1.08 billion) in the September quarter, missing the 60.5 billion-rupee median estimate of 37 analysts surveyed by Bloomberg.
State Bank of India (SBIN) dropped 3.9 percent. The nation’s largest lender said profit growth may slow as bad debts rise further and demand for credit declines in an economy that the International Monetary Fund said is expanding at the slowest pace in a decade.
The MSCI Emerging Markets Index’s 30-day volatility, a gauge of price swings, was at 8.91, near the lowest closing level since January 2006 of 8.16 on Nov. 7.
Lenovo Group Ltd. (992), the world’s second-largest maker of personal computers, jumped 5.8 percent, the most in almost three months in Hong Kong, after JPMorgan Chase & Co. (JPM) said the company may overtake Samsung Electronics Co. (005930) as the leading smartphone maker in China in the next few quarters.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 297, according to JPMorgan Chase & Co.’s EMBI Global Index.