Emerging Markets Drop to Six-Week Low as Commodities Fall

Emerging market stocks dropped to a six-week low as falling metals prices sank commodities shares and Turkish banks slid.

OAO Severstal, a Russian steelmaker, led declines on Moscow’s Micex Index after an explosion at one of its coal mines. Akbank TAS, a Turkish lender part-owned by Citigroup Inc., fell to the lowest level since Dec. 3 after Yapi & Kredi Bankasi AS cut the stock to the equivalent of sell. PT United Tractors gained the most in almost six weeks in Jakarta on speculation the company may sustain a recovery in sales, pushing Indonesia’s main index to a record level. Venezuelan bonds rose after the bolivar was devalued.

The MSCI Emerging Markets Index fell 0.2 percent to 1,058.75 by the close of trading in New York, the lowest level since Jan. 1. Turkey’s ISE National 100 Index extended its decline to the lowest since Dec. 21 after a car bomb at the border with Syria killed at least 10 people, according to the Anatolia news agency. The Bloomberg Base Metals 3-Month Price Commodity Index slid 0.8 percent, while copper fell the most in a month as China’s New Year’s holiday got underway.

“You’re still seeing this underperformance in emerging markets which are most sensitive to cyclical growth sentiment,” Michael Gayed, the chief investment strategist at Pension Partners LLC, in New York said by phone. “On a daily basis, almost continuously, emerging markets keep weakening.”

Markets in China, Hong Kong, South Korea, Taiwan, Vietnam and Malaysia are shut for the New Year break. Brazil’s market is closed for Carnival. Indonesia’s Jakarta Composite Index rose 0.3 percent to the highest level since at least April 1983.

Exchange IPO

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, closed little changed at $43.83. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slipped 0.8 percent. Price volatility on the MSCI Emerging Markets Index was at 8.8, the lowest level on record for the 100-day measure, according to data compiled by Bloomberg dating back to 2003.

Russia’s Micex Index fell 0.3 percent on its fourth day of declines as brent oil slid from a nine-month high. The Russian Direct Investment Fund will seek to buy as much as $100 million of stock in the Moscow Exchange’s initial public offering, according to a person with knowledge of the Kremlin-backed private-equity fund’s plan, who asked not to be identified because the information isn’t public.

Poland’s WIG 20 Index rose 0.1 percent. Dubai’s DFM General Index lost the same amount, after climbing as much as 1 percent.

Mexican Stocks

The benchmark IPC Index of 35 Mexican companies dropped 0.1 percent as data showed the country’s industrial production fell in December for the first time in three years.

Petroleo Brasileiro SA’s American depositary receipts dropped 2.3 percent in New York after newspaper O Estado de Sao Paulo reported that the state-run oil company has told the government that its debt ratios may rise. ADRs of Dalian, China-based Pactera Technology International Ltd. slipped 3 percent, leading a 0.6 percent slump in the Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York.

Akbank and Turkiye Garanti Bankasi AS dragged Turkey’s ISE National 100 Index 1.8 percent lower. India’s Sensex slipped 0.1 percent, falling for an eighth day, the longest losing streak since November 2011. The rupee touched the lowest level in two weeks on speculation capital inflows have slowed.

Trading volumes on the Jakarta gauge were 25 percent below the 30-day average and Micex trading was 20 percent less than average.

Bolivar Devaluation

Venezuelan government bonds rallied, with benchmark yields falling to a five-year low, after the government devalued the bolivar, helping cut the budget deficit by generating more local currency from oil exports. President Hugo Chavez, who is recovering from cancer surgery in Cuba, ordered his government to weaken the exchange rate by 32 percent to 6.3 bolivars per dollar starting Feb. 13, Finance Minister Jorge Giordani told reporters last week.

Consumer companies Arcos Dorados Holdings Inc., Coca-Cola Femsa SAB, Grupo Nutresa SA, industrial companies Masisa SA and Copa Holdings SA and MercadoLibre Inc., operator of an online trading site, have “significant exposure to Venezuela,” Morgan Stanley said in an e-mailed report today.

South Korea’s won strengthened 0.3 percent versus the dollar in offshore trading, while Indonesia’s rupiah rose to the strongest level in almost three weeks on optimism the central bank’s efforts to set an onshore fixing for its derivative contracts will stabilize the currency and bolster demand for local assets.

Akbank Sinks

The MSCI Emerging Markets Index has added 0.3 percent this year, trailing a 5 percent increase in the MSCI World Index. The emerging-markets index trades at 10.3 times estimated earnings, compared with the MSCI World’s valuation of 13.7, data compiled by Bloomberg show.

Severstal fell 2.5 percent after at least 17 coalminers died in an explosion in a mine in Russia’s northern Komi region.

Akbank sank 3.4 percent in Istanbul after Yapi Kredi cut its stock recommendation to the equivalent of sell from hold and lowered the price target, according to an e-mailed report. Garanti Bank slid 3.2 percent.

Tofas Turk Otomobil Fabrikasi AS, the Turkish unit of Fiat SpA in partnership with Koc Holding AS, rose 0.5 percent. Chief Executive Officer Kamil Basaran said Feb. 10 that the company will disclose in July details about plans to develop two new subcompact models. HSBC Holdings Plc raised Tofas to an equivalent of buy from hold.

Air Arabia

Mol Nyrt., Hungary’s biggest refiner, rebounded from its steepest slump in more than 15 months, leading a rally in Hungarian stocks. Mol rose 0.5 percent after dropping 5 percent Feb. 8 as Dana Gas PJSC sold 1.675 million shares in the refiner to help refinance its sukuk debt. The transaction was confirmed by Dana in a statement yesterday.

Air Arabia PJSC rose 3.3 percent to the highest level since May 2010 in Dubai on volume of almost five times the three-month daily average amid bets improved full-year profit will prompt the airline to pay a bigger dividend.

Gold Fields Ltd. slumped 1.4 percent in Johannesburg, as it spun off mining assets into Sibanye Gold Ltd. Gold Fields said Nov. 29 that it would place deeper, more labor-intensive South African mines into Sibanye.

United Tractors rose 3.6 percent in Jakarta, the most since Jan. 2. The company may maintain a rebound in heavy-equipment sales after reporting its January figures, according to Pandu Anugrah, an analyst at Maybank Kim Eng Securities in Jakarta. Those sales surged 96 percent last month from December, Investor Daily Indonesia reported Feb. 8.

Healthcare Surge

PT XL Axiata, an Indonesian mobile-phone operator, added 3.7 percent after the same newspaper reported that the company will refinance 4.5 trillion rupiah ($468 million) of debt this year.

Healthcare stocks rose 0.3 percent, the only group to gain on the emerging markets gauge. Cipla Ltd., a chemical and pharmaceutical manufacturer, jumped 3.8 percent in Mumbai to pare last week’s 8.1 percent slump. Dr. Reddy’s Laboratories Ltd. gained 2.3 percent after a five-day drop dragged it to a five-week low.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries slipped three basis points, or 0.03 percentage point, to 269 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

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