Emerging Stocks Fall on China Bird Flu; BRICs Slip 10% FrLyubov Pronina and Julia Leite
Emerging stocks declined to a four-month low as U.S. jobs data missed forecasts and the threat of a bird flu epidemic sent Chinese airlines tumbling. The MSCI BRIC Index dropped 10 percent from this year’s peak.
China Southern Airlines Co. sank 8.5 percent in Hong Kong, while Hyundai Motor Co. led losses in Seoul as the risk of conflict with North Korea spurred capital outflows. Russian shares dropped a third week as OAO Mobile TeleSystems slumped on concern the country’s largest mobile provider will lose market share. Brazil’s Bovespa index erased an earlier decline as utility Cia. Paranaense de Energia jumped 8.3 percent.
The MSCI Emerging Markets Index slipped 0.9 percent to 1,008.13 in New York, extending its weekly slump to 2.6 percent. Stocks fell on data showing U.S. employers hired fewer workers than forecast in March, while international investors sold the most South Korean equities since May. Six people have died from a new strain of bird flu in China.
“Markets hate uncertainty,” Martin Schulz, head of international equities at PNC Capital Advisors LLC in Cleveland, said by phone. His firm manages about $35 billion. “The big concern is that the payroll number just highlights that the U.S. is still in a deflationary post-crisis scenario.”
The MSCI BRIC Index of stocks in the biggest emerging markets posted a drop that would classify as a correction to some investors. The iShares MSCI Emerging Markets Index exchange-traded fund fell 0.2 percent to $41.61. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, lost 0.3 percent to 19.15.
All 10 industry groups in the MSCI Emerging Markets Index dropped, led by a gauge of consumer discretionary companies. The broader index has lost 4.5 percent this year, compared with a 6 percent gain in the MSCI World Index of developed-country stocks. The developing-nations measure trades at 10.5 times estimated 12-month earnings, compared with the MSCI World’s multiple of 13.7, data compiled by Bloomberg show.
Brazil’s Bovespa rose 0.7 percent. Copel, as the electrical utility is known, had the biggest gain since 2008.
The Micex Index dropped 0.7 percent to the lowest level since Dec. 4. Mobile TeleSystems, also known as MTS, tumbled 3.4 percent. VTB Group, Russia’s second-biggest lender, said March 4 it had completed a $3.55 billion acquisition of Swedish Tele2’s wireless business in Russia, fuelling speculation the unit will be sold to state-run OAO Rostelecom.
Benchmark stock gauges in Turkey, Hungary and South Africa also retreated yesterday.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong tumbled 3.1 percent, the steepest loss since July 23 after a holiday on March 4.
China Southern plunged the most in more than a year in Hong Kong trading, leading a slump in shares of the nation’s carriers on concern an outbreak of bird flu may hurt travel demand. Air China Ltd. and China Eastern Airlines Corp. also declined, causing the Bloomberg Asia Pacific Airlines Index to drop the most since May.
South Korea’s Kospi gauge fell 1.6 percent, capping the biggest weekly loss since May. Hyundai Motor and Kia Motors Corp., the biggest South Korean automakers, retreated at least 4.4 percent, extending March 4 slides after plans to recall vehicles in the U.S. The won dropped 0.7 percent to a seventh-month low.
Foreign funds unloaded a net 2.6 trillion won ($2.3 billion) of Kospi index shares last month, the most since May, Korea Exchange Inc. data show.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries dropped four basis points, or 0.04 percentage point, to 298 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.