Emerging Stocks Slump on China as Oil Tops $100 a Barrel
Emerging-market stocks declined for a second day and currencies sank amid concern the global economy will falter as growth in Chinese services industries slowed and crude oil surged above $100 a barrel.
The MSCI Emerging Markets Index slid 2.1 percent to 912.18, extending a two-day drop to 3.2 percent. The Shanghai Composite Index halted a three-day gain as Industrial & Commercial Bank of China Ltd. (601398), the nation’s biggest lender, sank. Egypt’s benchmark bonds fell, pushing the yield to a record, amid political unrest, while India’s rupee approached an all-time low. The premium investors demand to own emerging-market debt over U.S. Treasuries was unchanged, according to JPMorgan Chase & Co.
The slowdown in China’s service industries underscores Premier Li Keqiang’s challenge in achieving sustainable growth. Crude oil surged to a 14-month high, while Portugal’s 10-year bond yields rose as much as 139 basis points to 8.11 percent. Egypt’s military ousted President Mohamed Mursi from power, suspended the constitution and announced an early presidential election in a bid to resolve the political crisis that has polarized the nation.
“China’s growth story is really struggling,” Burt White, chief investment officer who helps oversee $247 billion at LPL Financial in Boston, said in a phone interview. “You’ve got the mess in Egypt and the concerns in Portugal, and those two things are putting a real damper to risk taking here.”
All 10 groups in the MSCI Emerging Markets Index fell, led by financial and industrial shares. The broad measure has slumped 14 percent this year, compared with a 7.6 percent gain in the MSCI World Index. The developing-nation gauge trades at 9.5 times projected earnings, lower than the MSCI World’s valuation of 13.2, according to data compiled by Bloomberg.
The iShares MSCI Emerging Markets Index exchange-traded fund slid 0.9 percent to $37.58. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 2 percent to 30.77.
The Ibovespa fell a fourth day as the Brazilian real sank to a four-year low, fueling concern that inflation will keep accelerating and further erode the expansion in Latin America’s biggest economy. OGX Petroleo e Gas Participacoes SA, billionaire Eike Batista’s oil company, extended its five-day plunge to 58 percent.
Russian equities sank for the first time in four days as a report showing a contraction in services industries stoked concern the country’s recovery will founder. OAO Magnit, Russia’s biggest food retailer, dropped 3.6 percent, while OAO Sberbank, the nation’s largest lender, lost 1.7 percent.
The Borsa Istanbul Stock Exchange National 100 Index (XU100) sank 3.6 percent in the biggest decline among major emerging-market gauges as banks retreated. Benchmark gauges is the Czech Republic, Poland and Hungary dropped at least 0.7 percent.
The Shanghai Composite has tumbled 18 percent from its recent peak on Feb. 6. ICBC lost 2 percent, while Sany Heavy Industry Co. (600031), the largest machinery maker, slid to the lowest level in three years as oil surged. The Hang Seng China Enterprises Index retreated 3.3 percent.
The rupee weakened to within 0.9 percent of its all-time low on concern overseas investors will pull more money from local assets, leaving the currency vulnerable to a record current-account deficit.
The extra yield for emerging-market debt over U.S. Treasuries was unchanged at 329 basis points, according to JPMorgan’s EMBI Global Diversified Index.