Emerging Stocks Drop on China as Aid Outlook Spurs Ukraine Bonds
Emerging-market stocks fell as Chinese equities slid the most in seven weeks on concern reduced lending to the property industry will curb growth. Ukrainian shares and bonds rallied as prospects for financial aid grew.
The MSCI Emerging Markets Index lost 0.1 percent to 958.42 in New York. China Vanke Co. (000002) paced declines in Chinese developers after the Shanghai Securities News said banks curbed real-estate credit. The Shanghai Composite Index (SHCOMP) sank 1.8 percent. Ukraine’s stock gauge jumped the most since May 2010 and government bonds rose as the International Monetary Fund, Europe and the U.S. said they stand ready to help the country.
New home price growth in China’s first-tier cities slowed in January after local governments took steps to rein in escalating values and banks slowed lending. Ukraine’s acting president, Oleksandr Turchynov, told parliament that he expects to move quickly to fill the government vacuum so officials can seek the economic aid needed to fend off default. The temporary government in Kiev said it needs $35 billion in financial aid.
“China is the main risk for EM assets,” Maarten-Jan Bakkum, an emerging-markets strategist at ING Investment Management Co. in The Hague, said by e-mail. “Slower growth in Chinese real-estate investment would have a big impact on Chinese growth and on EM growth.”
The iShares MSCI Emerging Markets Index exchange-traded fund was little changed at $39.43 after gaining as much as 0.9 percent. The Standard & Poor’s 500 Index rose, briefly reaching a record, as investors bet that the economy can withstand the slowing down of the Federal Reserve’s bond-buying program.
The Shanghai Composite Index decreased the most since Jan. 6. China Vanke, the nation’s largest listed developer, and Poly Real Estate Group Co. tumbled to the lowest levels since July 2010. Industrial & Commercial Bank of China Ltd. fell 2 percent, the steepest loss since Sept. 10.
Ukrainian government bonds maturing in April 2023 rallied for a third day, while the Ukrainian Equities Index soared 12 percent to close at the highest in 17 months. Kernel Holding SA, a sunflower oil producer based in Kiev, jumped 6.4 percent, the most since April.
Brazil’s Ibovespa closed little changed as ALL America Latina Logistica SA rallied 8.9 percent after Cosan SA Industria & Comercio offered to buy the railroad manager for 6.96 billion reais in stock. MRV Engenharia e Participacoes SA led homebuilders lower after economists covering Brazil cut growth estimates for 2014.
Poland’s WIG 30 Index climbed 1.5 percent to the highest level since Nov. 29 after data showed retail sales grew more than expected in January. Russia’s Micex Index added 0.1 percent.
The premium investors demand to own developing-nation debt over U.S. Treasuries fell six basis points to 328, according to JPMorgan Chase & Co. indexes.