Emerging Stocks Drop on China IPO Concern as Rand Weakens

Emerging-market stocks fell the most in a week, led by Chinese equities, on concern regulators may depress valuations by resuming initial share sales. South Africa’s rand slid to an almost four-year low versus the dollar.

Sinopec Shanghai Petrochemical Co. had the biggest decline on the MSCI Emerging Markets Index, sliding the most since September 2011 in Hong Kong. China Railway Construction Corp. slumped 6.5 percent. Gafisa SA sank 4.4 percent after the homebuilder reported a fourth-quarter loss. The ruble pared gains against the central bank’s currency basket after President Vladimir Putin nominated a Kremlin aide to lead the regulator.

The MSCI emerging-markets stock gauge retreated 0.6 percent to 1,057.65 in New York. The Shanghai Composite Index lost 1 percent, the most since March 4, after China Securities Journal said companies seeking initial public offerings are expected to submit reports on financial statements starting next week.

Investors “have only a modestly positive view on emerging-markets growth and therefore asset prices,” Koon Chow, head of emerging-markets strategy at Barclays Plc in London, said by e-mail.

The developing-nations measure has risen 0.2 percent this year, trailing a 7.1 percent gain in the MSCI World Index of developed-country stocks. The iShares MSCI Emerging Markets exchange-traded fund, the ETF tracking developing-nation shares, dropped a second day, losing 1.1 percent in New York to 43.39. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, jumped 2.4 percent to 15.77.

Brazil, Mexico

Brazil’s Bovespa Index fell 0.6 percent to 58,208.61. Gafisa, the homebuilder that is returning its focus to more expensive houses, fell the most in two months. The real dropped a day after the central bank intervened to weaken the best-performing emerging-market currency this year. Mexico’s IPC Index slid 0.1 percent.

Russia’s Micex Index fell 0.2 percent for the biggest drop in a week. The ruble was little changed at 34.8955 against the dollar-euro basket used to manage the Russian currency, from

34.8614 earlier in the day. PIK Group, a residential developer, sank the most on the benchmark gauge, losing 3.3 percent in its first decline in four days.

South Africa’s rand slid 0.9 percent to 9.1695 per dollar after weakening to 9.2122 per dollar, the lowest since April

2009. The nation posted a larger-than forecast current-account deficit.

Extra Yield

The extra yield investors demand to own emerging-market bonds over U.S. Treasuries fell 1 basis point, or 0.01 percentage point to 280 basis points, according to JPMorgan Chase & Co’s EMBI Global Index.

The Hang Seng China Enterprises Index of mainland Chinese companies listed in Hong Kong dropped 1.3 percent. The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. plunged 1.8 percent, the most in a month, led by Perfect World Co.

Companies seeking IPO sales are expected to submit reports on self-examination of their financial statements starting next week to meet the end-March deadline, the Securities Journal reported today, citing investment banks. The China Securities Regulatory Commission suspended IPO share sales in late October after companies were found to report falling profits right after listings.

“The possibility IPO share sales will resume is spooking the market,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

Sinopec Shanghai, a Chinese oil processor, tumbled 7.8 percent in Hong Kong, the steepest loss since Sept. 26, 2011. China Railway retreated 6.5 percent to the lowest level since Oct. 31.

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