Emerging Stocks Tumble to Nine-Month Low on World Bank
Emerging-market stocks tumbled to a nine-month low, led by declines in the Philippines and China, as the World Bank cut its global growth forecast. Mexico’s peso rose the most since 2011 on better-than-forecast U.S. data.
The Hang Seng China Enterprises Index plunged 2.7 percent, extending losses from a Feb. 1 high to 21 percent. China Overseas Land & Investment Ltd., the biggest mainland developer listed in Hong Kong, slid 3.5 percent. Benchmark gauges in the Philippines, Thailand and Indonesia dropped at least 1.9 percent. The Micex Index (INDEXCF) sank to a one-year low in Moscow as OAO Gazprom slumped. Brazil’s Ibovespa rose the most since March 6, while Mexico’s peso gained 2.4 percent.
The MSCI Emerging Markets Index slid 1.1 percent to 943.59, the lowest since Sept. 5. The global economy will expand 2.2 percent this year, less than a January forecast of 2.4 percent and slower than last year’s 2.3 percent, the World Bank said yesterday as it lowered its prediction for developing economies.
“It’s a vortex of negativity,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion of assets, said by phone. “Investors have to divorce themselves from these large macroeconomic projections, which are continually being revised. Emerging markets have been dragged into this hypersensitivity.”
Developing nations from Brazil to India took steps to stem an outflow of capital as concern mounts that developed nations are approaching the beginning of the end of an era pumping unprecedented liquidity. The MSCI Emerging Market Index has fallen 10 percent since Chairman Ben S. Bernanke said May 22 the U.S. Federal Reserve could scale back asset buying if it’s confident of sustained economic improvement.
The emerging-market index has lost 11 percent this year, compared with an 9.4 percent advance in the MSCI World Index of developed-country stocks. The emerging-stocks measure trades at 9.7 times 12-month projected earnings, the lowest level since August 2012, according to data compiled by Bloomberg. Nine out of 10 groups in the gauge retreated today as technology and financial shares had the biggest losses.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 2.1 percent to $39.94. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slid 6.9 percent to 26.05.
China’s growth outlook was cut to 7.7 percent from 8.4 percent, according to the World Bank’s report. The 6.1 percent forecast for India was reduced to 5.7 percent and Brazil’s was lowered to 2.9 percent from 3.4 percent.
“The bad news is that the governance fundamentals for most of the EM universe and the situation in China remain very bearish,” John-Paul Smith, an emerging-markets strategist at Deutsche Bank AG in London said by e-mail. “The good news is that U.S. bond yields should begin to decline over the near term, which removes one source of bearish sentiment.”
Brazil’s Ibovespa rose for the first time in five days as homebuilder MRV Engenharia e Participacoes SA soared 12 percent. Usinas Siderurgicas de Minas Gerais SA jumped 8.8 percent, driving commodity exporters higher. The real rebounded from a four-year low after the government removed a 1 percent tax charged on bets against the dollar in the futures market.
Mexico’s peso jumped the most in almost two years as U.S. reports showing a pickup in retail sales and a drop in jobless claims boosted prospects for the Latin American nation’s top export market. The currency surged 2.4 percent to 12.6273 per U.S. dollar, the biggest advance since Sept. 23, 2011. The peso’s rally today pushed it to the biggest gain in 2013 among 24 major emerging-market currencies tracked by Bloomberg.
Russia’s Micex Index declined 1.5 percent as OAO GMK Norilsk Nickel, the world’s biggest producer of the metal, tumbled to the lowest price since July 2010. Gazprom dropped a third day to the lowest level since 2009.
The lira climbed to its highest level this month as calm returned to Istanbul’s Taksim Square after two weeks of clashes between anti-government demonstrators and riot police. The koruna weakened as police arrested several people in raids, including at government offices, which put Czech Prime Minister Petr Necas under pressure from the opposition. The forint strengthened a third day as Hungary raised more debt than planned.
The Hang Seng China Enterprises Index (HSCEI) closed at the lowest level since Sept. 26, while the Shanghai Composite Index fell 2.8 percent to the lowest level since Dec. 13 as it resumed trading after a three-day holiday. China Overseas Land sank to a seven-month low.
Overseas funds sold the most Indian shares over a two-day period since November 2011, contributing to a slide that has dragged the nation’s benchmark equity index to its lowest level in two months.
The Philippine Stock Exchange Index (PCOMP) dropped 6.8 percent, extending this month’s retreat to 13 percent. Thailand’s SET Index sank 2.1 percent, while Indonesia’s benchmark gauge lost 1.9 percent. Overseas investors unloaded a net $2.7 billion from the three stock markets this month through yesterday, the biggest eight-day outflow since Bloomberg began compiling the data in 1999.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell two basis points, or 0.02 percentage point, to 328 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.