Emerging Stocks Erase Gains for 2013 Year as Earnings Disappoint
Emerging-market stocks erased gains for the year, underperforming developed-nation equities as earnings at companies from Hyundai Motor Co. (005380) to Petroleo Brasileiro SA (PETR4) trailed analysts’ forecasts.
The MSCI Emerging Markets Index (MXEF) fell 1.3 percent to 1,055.02 as of 4:45 p.m. in Hong Kong, wiping out this year’s advance. The gauge has fallen 2.6 percent from a 17-month high on Jan. 3 as 62 percent of the companies included reported quarterly profit that missed estimates, compared with 34 percent in the MSCI World Index of developed nations. The MSCI World has climbed 4.4 percent this year. The Hang Seng China Enterprises Index slumped 2.2 percent today, also erasing this year’s gains.
Falling revenue at Poland’s largest phone company triggered dividend cuts that drove Telekomunikacja Polska SA down 43 percent this year, the worst-performer on the emerging-markets gauge, contributing to the 6.4 percent drop in the country’s WIG 20 Index. Jaiprakash Associates Ltd. (JPA), which built India’s only Formula One track, tumbled 26 percent after a plunge in profits as India’s economy expands at the slowest pace in a decade.
“The fundamentals are still predominantly negative -- that to me is the most compelling reason for being bearish,” said John-Paul Smith, an emerging-markets strategist at Deutsche Bank AG in London. The MSCI developing-nations gauge is set to lose 10 percent this year, Smith said in a phone interview on Feb. 12.
Materials, telecom services and energy stocks have lost the most among 10 industry groups, retreating at least 2.9 percent this year, data compiled by Bloomberg show. OAO Gazprom, Russia’s biggest energy producer, has lost 5.5 percent, as the company said its 2012 dividend may fall as much as 22 percent after weaker natural-gas sales in all markets reduced earnings.
Hyundai Motor, the biggest South Korean automaker, has slipped 1.1 percent this year. The company reported a steeper profit decline than estimated on Jan. 24 as the won’s appreciation hurt the value of overseas sales. The currency has climbed 4.1 percent against the dollar and 22 percent against the yen in the past six months.
The common shares of Petroleo Brasileiro, or Petrobras, have fallen 21 percent in 2013. The state-run oil producer said Feb. 4 it will reduce dividends as earnings before interest, taxes, depreciation, and amortization items unexpectedly dropped.
Jaiprakash Associates retreated as the Indian company reported on Feb. 11 its quarterly profit slumped by about 64 percent.
“When I look at the individual markets from both the country perspective and the bottom-up stock perspective, I find very little that I want to own at the moment,” Deutsche Bank’s Smith said.