Emerging-Market Stocks Fall as U.S. GDP Stokes Stimulus Concern

Emerging-market stocks fell after the U.S. economy grew more than analysts forecast and the Federal Reserve continued to reduce monetary stimulus that has buoyed demand for developing nations’ assets.

The MSCI Emerging Markets Index dropped 0.2 percent to 1,078.67, ending a two-day advance. The measure has climbed 2.7 percent in July, headed for its sixth month of gains and the longest winning streak since 2006.

Stocks reversed earlier gains after Commerce Department data showed that increases in U.S. consumer spending and business investment helped U.S. gross domestic product rebound in the second quarter. Federal Reserve policy makers reduced monthly bond buying to $25 billion in their sixth consecutive $10-billion cut, remaining on pace to end the stimulus program in October.

“It’s all about the better U.S. GDP number,” Maarten-Jan Bakkum, an emerging-market strategist at ING Investment Co. in the Hague, said by e-mail.

Stocks fell in Brazil, Poland and South Africa with the rand and the real losing at least 0.5 percent against the dollar. Russia’s Micex Index rose 0.9 percent as some investors saw new sanctions against the country tied to the Ukraine conflict as being milder than anticipated.

Brazil, South Korea

European Union governments agreed yesterday to ban Russian state-owned banks from selling shares or bonds in Europe, restrict the export of equipment to modernize the oil industry and bar export of equipment with military uses. U.S. penalties followed against OAO VTB Bank, OAO Bank of Moscow and OAO Russian Agricultural Bank, adding to sanctions announced two weeks ago.

The Ibovespa fell 0.4 percent in Sao Paulo as disappointing corporate earnings overshadowed speculation that a change in Brazil’s government will support growth in Latin America’s largest economy. Credit-card processor Cielo SA fell 4.7 percent after posting a quarterly profit that trailed analysts’ estimates.

Six of 10 industry groups on the emerging-markets index declined, led by industrial stocks.

South Korea’s Kospi Index advanced 1 percent. SK Telecom jumped to the highest level since December 2007. Korea Gas Corp. and KT Corp. rallied more than 6 percent.

SK Telecom and KT Corp., which pay relatively high dividends in South Korea, are gaining along with state-run companies as measures by the government to boost payouts gain momentum, according to Kim Chul Min, a money manager at Mirae Asset Global Investments Co.

Relative Value

The emerging-markets gauge has risen 7.6 percent this year and trades at 11.2 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 4.8 percent and is valued at a multiple of 15.

The Shanghai Composite Index lost 0.1 percent, halting six days of gains. PetroChina Co., the nation’s biggest oil producer, rose 3.1 percent. Investors should buy the shares as a probe into former parent company head Zhou Yongkang signals an anti-graft campaign is close to coming to an end, Citic Securities Co. said.

(A reference to the Micex erasing gain was corrected in a previous version.)

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