Emerging Stocks Fall as Malaysia Shares Drop on Election Concern

Developing-nation stocks fell, led by the biggest tumble in Malaysian equities since September 2011, after the MSCI Emerging Markets Index approached the highest valuation in 20 months.

Axiata Group Bhd., Malaysia’s biggest mobile-phone operator, had the steepest drop since March 2009 on concern the government will call an election that will weaken its grip on power. OAO Lukoil, Russia’s second-largest crude producer, snapped a three-day advance as oil slid from a four-month high. Natura Cosmeticos SA, Brazil’s biggest cosmetics maker, rose to its highest since Jan. 11 after data showing slower-than-forecast inflation boosted consumer stocks.

The MSCI Emerging Markets Index slipped 0.2 percent to 1,078.05 as of the close of trading. The gauge added 0.7 percent last week and trades at 10.9 times estimated profit, within 1 percent of the highest level since May 2011. European finance ministers meet in Brussels today for the first time this year to discuss the continent’s debt crisis, while U.S. markets are closed for a public holiday.

“Investors are taking advantage of the high prices and stretched valuations to pocket some gains and slowly rebalance their portfolio,” Jonathan Ravelas, chief market strategist at BDO Unibank Inc., said by phone from Manila today. “Markets would like to see Europe move out of the debt crisis and enter a recovery mode this year.”

Russia’s Micex Index retreated from the highest since April, losing 0.2 percent, as the price of oil declined as much as 0.5 percent in New York. The volume of shares changing hands in Micex companies today was 29 percent less than the 30-day average, according to data compiled by Bloomberg.

Micex IPO

The Moscow Exchange, which runs the Micex and RTS indexes, expects to raise more than $500 million in an initial public offering, according to a person who asked not to be identified, citing a quiet period before the IPO. The amount is less than an earlier estimate that the sale would raise $1 billion, which was given on Jan. 16 by three people familiar with the matter who asked not to be named as the details aren’t public.

Brazil’s Bovespa index slipped 0.1 percent to 61,899.71 after a report showing slower-than-forecast inflation spurred speculation policy makers will hold the benchmark lending rate at a record low for longer in an attempt to boost the recovery.

B2W Cia. Global do Varejo, a Brazilian online retailer, advanced 2.8 percent to 16.74 reais. Natura jumped 1.6 percent to 56.50 reais.

Phone company Oi SA tumbled 5.1 percent in Sao Paulo, the biggest drop on the MSCI Emerging Markets Index, after Veja magazine reported that controlling shareholders disapprove of the performance of Chief Executive Officer Francisco Valim. The company’s press office declined to comment to the report when contacted by Bloomberg News.

Czech Stocks Drop

The Dubai Financial Market General Index fell 0.3 percent, ending a three-day rally that sent the measure to the highest close since April 2010. The Czech PX Index lost 1.2 percent in Prague, heading for the lowest close since Dec. 17.

Turkey’s ISE National 100 Index gained 0.3 percent, rising for a seventh day, its longest winning streak in three months. The BSE India Sensitive Index added 0.3 percent to the highest close since Jan. 6 after Reliance Industries Ltd., India’s biggest company by market value, reported profit that beat estimates.

The FTSE Bursa Malaysia KLCI Index sank 2.4 percent, the sharpest loss since September 2011, with volumes 89 percent more than the 30-day average. Speculation Malaysia’s government will call for national elections as early as March helped trigger the selloff in the country’s equities, according to Samsung Asset Management Co.’s Alan Richardson.

“There is uncertainty whether the ruling coalition would be able to at least maintain the existing majority they have,” Richardson, a Singapore-based fund manager who helps oversee about $82 billion for Samsung Asset, said by phone.

Malaysia’s ringgit depreciated 0.8 percent before inflation data this week, which economists predict will show consumer prices rose for the first time in 15 months.

Axiata, Malaysia’s largest mobile-phone operator, lost 5.1 percent. CIMB Group Holdings Bhd., the nation’s second-biggest lender by assets, slumped 4.5 percent, the most since Aug. 25, 2011.

Lukoil slid 0.9 percent and OAO Gazprom, Russia’s biggest oil and natural gas company, slid 0.6 percent in Moscow.

Kernel Holding SA, Ukraine’s biggest sunflower-oil producer, jumped 4.5 percent in Warsaw, the most since Dec. 3. The company said its grain sales surged 82 percent and bulk oil sales rose 66 percent in the fiscal second-quarter ending in December. BRE Bank SA raised its recommendation on the stock to accumulate from reduce.

Tupras Turkiye Petrol Rafinerileri AS, Turkey’s sole oil refiner, declined 2.9 percent in Istanbul trading after UBS AG cut the stock to sell from the equivalent to hold.

Aldar Tumbles

Aldar Properties dropped 9.8 percent, the most since December 2009 after agreeing to buy Sorouh Real Estate Co. with its shares. Sorouh jumped 4.3 percent to the highest close since December 2010.

Reliance Industries, owner of the world’s largest oil-refining complex, rose 2.2 percent to the highest since June 2011 after third-quarter profit increased the most in two years.

The MSCI Emerging Markets Index has risen 2.2 percent this year, trailing a 3.6 percent gain in the MSCI World Index of developed nations. A gauge of technology stocks in the emerging-markets measure fell 0.8 percent today, the most of 10 industry groups.

Samsung Falls

Samsung Electronics Co., the world’s biggest maker of smartphones and televisions, declined 1.8 percent, the biggest drag on the MSCI Emerging Markets Index.

The Hang Seng China Enterprises Index rose 0.2 percent in Hong Kong, the highest close since Aug. 2, 2011. Thailand’s benchmark index added 0.4 percent to close at the highest level since July 1995.

China Vanke Co.’s foreign-currency denominated B shares jumped 10 percent to the highest level in more than five years in Shenzhen. The developer plans to convert all of its B shares to Hong Kong-listed H shares pending approval from shareholders and the regulators, the company said in an exchange filing on Jan. 18.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose three basis points, or 0.03 percentage point, to 264 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

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