Emerging Stocks Drop as Apple Sales Hit Asian Suppliers

Emerging-market stocks retreated the most in a week as slower sales growth at Apple Inc. dragged down Asian suppliers and earnings reports disappointed investors.

Hon Hai Precision Industry Co., which assembles Apple’s iPhone, slumped to a five-month low in Taipei. India’s Tata Motors Ltd. lost the most since May as its luxury-vehicle unit said profit margins probably fell. Hyundai Motor Co. slid to a three-week low after the automaker said fourth-quarter net income declined more than expected. Embraer SA surged the most in two years after Brazil’s top plane maker received an order worth up to $4 billion.

The MSCI Emerging Markets Index fell 0.4 percent to 1,072.26 in New York as an exchange-traded fund of developing-nation stocks also declined. Apple shares sank 12 percent after the company posted the slowest profit growth since 2003 and the weakest sales increase in 14 quarters. South Korea’s Kospi Index dropped to a six-week low as economic growth data missed estimates and North Korea threatened a nuclear test. The Shanghai Composite Index fell.

“It feels like sentiment has run hard,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP in London, said by e-mail. “With earnings season coming up and with some mixed results so far, there doesn’t seem to be much appetite to add risk at the moment.”

MSCI’s developing-nations gauge has added 1.6 percent this year, trailing a 4.3 percent increase by the MSCI World Index. The emerging-markets index trades for 11 times estimated profit, compared with the MSCI World’s multiple of 13.5, data compiled by Bloomberg show. A measure of 100-day volatility on the developing-country index dropped to 10.3 today, the lowest level since October 2005.

Power Rates

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, dropped 0.4 percent to 44.31, while the Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 3.3 percent.

Brazil’s Bovespa index fell 1.3 percent. Centrais Eletricas Brasileiras SA plunged 7.5 percent to the lowest price in a week in after Brazil reduced energy costs more than previously announced. President Dilma Rousseff said the cuts will pare power rates by as much as 32 percent compared with a reduction of 28 percent she announced in September.

Gold Miners

Embraer was the best performer on the MSCI emerging markets gauge, climbing 8.9 percent after announcing an order from Republic Airways Holdings Inc. for 47 E175 airplanes, with an option for an additional 47. The contract may total $4 billion should the option for more planes be exercised.

Gold companies fell in Lima as the metal declined by the most in three weeks. Rio Alto Mining Ltd., the developer of the La Arena copper and gold mine in Peru, dropped 2.5 percent, the most since Jan. 3, while Cia de Minas Buenaventura SA tumbled to the lowest price since September 2009.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. declined 0.7 percent to 100.53, the lowest close in two weeks. Stocks fell on concern the nation’s economic recovery won’t be sustained, while Focus Media Holding Ltd. dropped 3.1 percent amid a probe by the Securities and Exchange Commission.

The Standard & Poor’s 500 Index was little changed at 1,494.82. The Conference Board’s index of U.S. leading indicators rose in December by the most in three months, signaling stronger housing and job markets will help the world’s largest economy make more progress in the first half of 2013. Other reports showed claims for jobless benefits unexpectedly dropped, manufacturing picked up and consumer confidence waned.

Kospi Drops

The International Monetary Fund yesterday cut global growth forecasts and now projects a second year of contraction in the euro region. The Czech Republic’s PX index fell 0.5 percent, erasing yesterday’s gains, and Russia’s Micex Index fell 0.2 percent. Turkey’s ISE National 100 Index added 0.1 percent, rising for a 10th day.

South Korea’s Kospi index sank 0.8 percent after the Bank of Korea said economy grew 1.5 percent in the fourth quarter, less than the median 1.8 percent estimate of 12 economists surveyed by Bloomberg News. The won weakened 0.3 percent versus the dollar.

North Korea threatened to conduct a nuclear weapons test “targeted” at the U.S. after the nation pushed through United Nations sanctions against the totalitarian state for a rocket launch last month.

Foreign Investment

Taiwan’s Taiex Index fell 0.6 percent and the BSE India Sensitive Index, or Sensex, lost 0.5 percent.

India’s rupee pared declines after the government increased the limit on foreign investment in local debt markets. The currency closed little changed versus the dollar after an earlier drop of as much as 0.4 percent.

Vietnam’s VN Index rallied 2 percent after a minister said government support for social housing would bolster the property market. Pakistan’s Karachi Stock Exchange 100 Index rose for a seventh day, the longest winning streak since Aug. 23, to a record.

Rising Volumes

Equity trading volumes were higher than average in Poland, South Korea, India and China, with more than two times the 30-day average changing hands in WIG20 shares a day after Poland sold a stake in PKO Bank Polski SA, the country’s largest lender. In South Korea, about 22 percent more Kospi shares changed hands versus the 30-day average, according to data compiled by Bloomberg.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell two basis point to 262 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

United Co. Rusal, the world’s biggest aluminum producer, retreated 1.9 percent and OAO Norilsk Nickel lost 0.7 percent in Moscow. Morgan Stanley cut Moscow-based Norilsk to the equivalent of hold, and Rusal to the equivalent of sell, citing a recent rally.

Polyus Gold International Ltd. jumped 3.6 percent in Moscow, the highest close since April 23. Billionaire Mikhail Prokhorov’s Onexim Holdings Ltd. agreed to sell his entire stake in the gold producer, according to three people with knowledge of the plan who asked not to be identified as the information is confidential.

Consumer Stocks

Turkiye Vakiflar Bankasi TAO, a Turkish state lender, retreated 3.7 percent in Istanbul, the most since Oct. 3, after Deputy Prime Minister Ali Babacan said a secondary public offering would be possible after the bank’s shares are transferred to the Treasury in at least a few months’ time.

A gauge of consumer discretionary companies in the MSCI Emerging Markets Index fell 1 percent, the most among 10 industry groups, followed by technology companies. Hon Hai lost 2.9 percent, while Apple plunged the most since since September 2008. Tripod Technology Corp., which makes printed circuit boards, fell 5 percent in Taipei and LG Display Co., which supplies panels to Apple, slipped 1.2 percent in Seoul.

Hyundai Motor Co. sank 4.6 percent after it said fourth-quarter net income declined 5.5 percent to 1.89 trillion won ($1.8 billion). Analysts expected 1.98 trillion won, according to the average estimate of seven analysts surveyed by Bloomberg.

Tata Motors tumbled 6.3 percent in Mumbai. Profit before interest, taxes, depreciation and amortization in the three months to December was similar to figures during the preceding two quarters, and the margin relative to sales was probably “slightly lower,” Tata’s Jaguar Land Rover Plc unit said.

Chinese Manufacturing

Lenovo Group Ltd., which makes personal computers, climbed 6.6 percent, the most since Aug. 1, in Hong Kong. The company’s smartphone business in China has turned profitable, and is seeing strong sales growth in emerging markets, the Wall Street Journal said, citing Chief Financial Officer Wong Wai Ming.

Data today showed China’s manufacturing is expanding at the fastest rate in two years, boosting prospects that economic growth will accelerate. The preliminary reading of a Purchasing Managers’ Index was 51.9 in January, according to HSBC Holdings Plc and Markit Economics. That compares with the 51.5 final reading for December and the 51.7 median estimate of 17 analysts surveyed by Bloomberg News.

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