Emerging Stocks Fall as Borsa Istanbul Leads World Losses

Emerging-market stocks fell, led by Turkish shares, as the lira sank to a record low after HSBC Holdings Plc said the nation is heading for stagflation.

The MSCI Emerging Markets Index slipped 0.3 percent to 974.65. The Borsa Istanbul 100 Index posted the biggest decline among 94 world stock gauges tracked by Bloomberg, while the lira dropped for a fourth consecutive day. Russian stocks retreated as OAO Rosneft joined a slide in oil prices and the ruble sank to a five-year low. The Ibovespa fell for the first time in three days as Petroleo Brasileiro SA declined after denying a report that it plans to raise fuel prices in Brazil.

Nine out of 10 groups in the emerging-market gauge fell, led by health-care and consumer companies. The lira may weaken further if the central bank doesn’t change interest rates next week, Fatih Keresteci, a strategist at HSBC in Istanbul, wrote in an e-mailed note today. Investors also watched U.S. data for clues on the pace of stimulus cuts by the Federal Reserve.

“There should be political conditions for economic improvement, but unless some important political decisions are made in Turkey, we are not likely to see any good news,” Timothy Ghriskey, who oversees $1.5 billion as the chief investment officer at Solaris Group LLC, said by phone from New York. “Political instability is the main source of economic instability.”

The iShares MSCI Emerging Markets Index exchange-traded fund decreased 0.6 percent to $39.99, dropping for a second day. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, jumped 5.5 percent to 21.93.

Petrobras Slumps

The Ibovespa retreated 0.8 percent as Petrobras fell 2.8 percent, contributing the most to the benchmark equity measure’s decrease after saying no decision has been made on fuel prices. Newspaper Folha de S.Paulo had reported that the state-owned oil company may increase them before June.

The Borsa Istanbul sank 1.9 percent, the most since Dec. 26. Turkey’s currency, bonds and stocks slid last month after police arrested dozens of suspects in a corruption probe. The lira has tumbled since prosecutors started the investigation on Dec. 17, spurring the central bank to pledge the sale of least $6 billion through the end of this month. The regulator’s Monetary Policy Committee convenes on Jan. 21.

Russian stocks fell after gaining the most in a month yesterday as Rosneft slid 1.1 percent. The company received about $20 billion as part of a $70 billion prepayment deal to supply crude to China National Petroleum Corp., according to two people with knowledge of the matter. That triggered a concern the company may mismanage the redeployment of funds. The ruble slid to the lowest since April 2009.

China, India

Most Chinese stocks rose as Guangdong Electric Power Development Co. led a rally for power producers after saying profits doubled. Guangdong Electric climbed 1.5 percent. Ping An Insurance (Group) Co., China’s second-biggest insurer, advanced the most in two months after saying it’s now offering financial services through an online platform. Aluminum Corp. of China Ltd., also known as Chalco, jumped 1.5 percent.

India’s benchmark index retreated from a five-week high, as energy companies and automakers fell. Oil & Natural Gas Corp. had the biggest drop in a week, ending a six-day, 4.5 percent rally in the S&P BSE India Oil & Gas Index. Tata Motors Ltd., owner of Jaguar Land Rover, and Mahindra & Mahindra Ltd. slid at least 1.4 percent.

The Philippine peso weakened beyond 45 per dollar for the first time since 2010 on speculation the Federal Reserve will quicken stimulus reductions as the U.S. economy improves.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose four basis points, or 0.04 percentage point, to 316 basis points, according to JPMorgan Chase & Co.

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