Emerging Stocks Snap 7-Day Gain as Russian Shares Slide
Emerging-market stocks fell for the first time in eight days, led by technology shares, after Intel Corp. (INTC)’s sales target missed some estimates. Russian shares slid as an opposition leader was sentenced to prison, while the forint tumbled and Argentine bonds rose the most in four months.
Samsung Electronics Co. (005930) lost 2.1 percent in Seoul and Innolux Corp. sank 6.7 percent in Taipei after Intel’s forecast took into account a slump in the personal-computer market. The Micex Index (INDEXCF) had its biggest loss in a month following the sentencing of Alexey Navalny, who had led mass protests against Russian President Vladimir Putin. Hungary’s forint and South Africa’s rand dropped at least 0.9 percent, leading declines in most emerging-market currencies.
“For Russia, the Navalny case is important as it confirms the continuous deterioration in the political climate,” Maarten-Jan Bakkum, a senior emerging-markets strategist in The Hague at ING Investment Management, which oversees about $19 billion in emerging markets, said by e-mail. “The rest of the emerging world is more driven by expectations about U.S. monetary policy these days.”
The MSCI Emerging Markets Index lost 0.2 percent to 957.44, snapping the longest winning streak since January. Developing nation shares had climbed the past week as speculation tempered that the Federal Reserve would start scaling back stimulus.
The iShares MSCI Emerging Markets Index exchange-traded fund fell 1.2 percent to $39.39. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, climbed 1.4 percent to 26.33.
Fed Chairman Ben S. Bernanke spoke to lawmakers in the U.S. Senate today as investors assess the outlook for the Fed’s $85 billion-a-month bond-buying program, which capped increases in borrowing costs and stoked a 33 percent jump in global equities in the past three years.
Bernanke told senators that one reason for the recent rise in long-term interest rates is the unwinding of leveraged and “excessively risky” investing. Ten-year Treasury yields jumped more than a full percentage point from 1.63 percent at the beginning of May to 2.74 percent on July 5.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 11 basis points, or 0.11 percentage point, to 308 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index. Argentine bonds rallied on speculation the International Monetary Fund is considering supporting the government in its legal battle against defaulted bondholders.
Intel said yesterday revenue in the third quarter will be $13.5 billion, less than average estimate of $13.7 billion in Bloomberg survey of analysts. The MSCI Emerging Markets Information Technology Index posted the biggest decline among 10 industry groups, falling 1.8 percent, as Taiwanese smartphone maker HTC Corp. dropped 6.5 percent to the lowest since November 2005.
Samsung Electronics sank the most in more than a week, dragging the Kospi (KOSPI) index lower by 0.6 percent. LG Display Co. fell 3.1 percent before reporting second-quarter profit that missed estimates.
“We are in the earnings season and markets will react to any news on profits, sales and forecasts,” Gopal Agrawal, chief investment officer at Mirae Asset Global Investments (India) Pvt., said by phone from Mumbai today. “Intel’s sales forecast are hurting Asian technology stocks. ”
The Micex Index fell 1.1 percent, its biggest loss since June 20. The ruble weakened 0.5 percent versus the dollar, its first decline in four days. OAO Sberbank slipped 2.6 percent, while VTB Group lost 2.2 percent in Moscow.
The trial against Navalny was the highest-profile case against a Putin critic since the jailing of former Yukos Oil Co. owner Mikhail Khodorkovsky. A court in Kirov, 900 kilometers (560 miles) northeast of Moscow, ruled that Navalny defrauded state-owned timber company Kirovles of 16 million rubles ($494,000).
Navalny, who maintains his innocence, is facing further prosecutions. All relate to separate cases of alleged fraud and carry a maximum penalty of 10 years.
The forint weakened and the BUX Index of stocks sank 2.3 percent. OTP Bank Nyrt., Hungary’s largest lender, fell 4.7 percent, extending yesterday’s 3.6 percent loss. Poland’s WIG20 Index retreated 0.4 percent.
Options traders are paying among the highest premiums to buy the forint and Poland’s zloty relative to contracts allowing for sales of any currencies tracked by Bloomberg, meaning they may have climbed too high to be sustainable. The currencies of two of the European Union’s eastern members are also testing boundaries of the 20-day Bollinger band, signaling an imminent turnaround after the past week’s rally.
The MSCI Emerging Markets stocks gauge has lost 9.3 percent this year and trades at about 10 times its 12-month projected earnings. The MSCI World Index of developed nations has gained 13 percent in 2013 and trades at 13.8 times.
The Shanghai Composite Index lost 1.1 percent. Real estate companies and commodity producers slid amid concern increasing home prices will limit room for the government to spur economic growth.
“Downside risks” to the IMF’s 7.75 percent growth estimate have risen after a gauge of manufacturing weakened in June, the Washington-based fund said yesterday.
China Vanke Co. (000002), the nation’s biggest listed property developer, lost 1.2 percent in Shenzhen. House prices in Beijing, Shanghai and Guangzhou rose the most since at least January 2011 last month from a year earlier, official data showed. The government may expand a tax on property purchases, Xinhua News Agency said yesterday.
Brazil’s Ibovespa rose 0.5 percent in its fourth day of gains, the longest winning streak in two months.
Mexican homebuilders led declines on the IPC index after Deutsche Bank AG analyst Esteban Polidura said listed developers “might miss consensus expectations by an ample margin.”
Urbi Desarrollos Urbanos SAB tumbled 7.6 percent. Corp. Geo SAB, Mexico’s second-biggest homebuilder by revenue, lost 4.9 percent.
To contact the editor responsible for this story: Gavin Serkin at firstname.lastname@example.org