Emerging Stocks, Currencies Decline as Russian Bond Yields SurgeElena Popina and Natasha Doff
Emerging-market stocks and currencies fell as U.S. payrolls data stoked concern that the Federal Reserve will raise interest rates sooner than expected, damping demand for higher-yielding assets in developing nations.
AFK Sistema retreated to the lowest since April 2009 in Moscow, leading the benchmark Micex Index lower. South Africa’s rand weakened 1.3 percent to the lowest since October 2008. The ruble increased 3.4 percent on speculation Russia is selling foreign currency. Haitong Securities Co. advanced to a record on acquisition talks as a gauge of Hong Kong-traded Chinese stocks rallied.
The MSCI Emerging Markets Index fell 0.1 percent to 985.68, pushing the weekly decline to 1.9 percent. Employers in the U.S. added 321,000 jobs in November, the most since January 2012, Labor Department figures showed today in Washington. The hiring surge exceeded the most optimistic projection in a Bloomberg survey of economists and bolstered the case for a U.S. interest-rate increase.
“Implications that the Fed will raise interest rates sooner than later are exerting a drag on emerging-market equities,” Alan Gayle, who helps oversee about $50 billion as a senior strategist at RidgeWorth Capital Management, said by phone. “The big factor driving the rising skepticism around the Russian market is the notion that Putin is going to continue to fight western sanctions, and that is likely making investors nervous and makes them seek higher returns elsewhere.”
President Vladimir Putin, in a speech at the Kremlin yesterday, attacked the U.S. and the European Union for backing Ukraine in the separatist fight in the former Soviet republic. International sanctions linked to the conflict and tumbling oil prices are pushing the economy toward what the Economy Ministry this week forecast would be a recession in 2015.
Eight out of 10 industry groups in the emerging-markets measure fell today, led by health-care shares. The MSCI developing-nation gauge has lost 1.7 percent this year and trades at 11.2 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 4.7 percent in 2014 and is valued at a multiple of 15.6.
A Bloomberg gauge tracking 20 developing-nation currencies fell for a ninth straight day, declining 0.3 percent. The ruble strengthened for the second time in three days. Russia’s central bank sold $1.9 billion of foreign currency on Dec. 3, when the ruble snapped a six-day drop.
The Micex Index lost 3.3 percent in the biggest drop since March, widening its loss this week to 0.3 percent. Policy makers may be selling foreign currency today, according to three traders contacted by Bloomberg. The yield on 10-year Russian bonds jumped 81 basis points to 12.07 percent, the highest since October 2009.
Sistema dropped 11 percent, extending its weekly loss to 30 percent, the worst performance on the Micex. A Russian court will consider an appeal against extending Sistema’s majority owner Vladimir Evtushenkov’s house arrest to March relating to a money-laundering case.
Haitong Securities, China’s second-largest brokerage by market value, surged 12 percent in Hong Kong on talks its unit is in discussions to buy Banco Espirito Santo de Investimento SA, according to a Hong Kong exchange filing yesterday.
Hungary’s BUX index gained for a fourth day, adding 2 percent. Equity indexes in Poland, the Czech Republic, Mexico and Saudi Arabia climbed at least 0.5 percent. Brazil’s benchmark Ibovespa Index added 1 percent.
The premium investors demand to own emerging-market debt rather than U.S. Treasuries narrowed two basis points to 314 basis points, JPMorgan Chase & Co. Indexes show.
The Hang Seng China Enterprises Index advanced 1 percent, while the Shanghai Composite Index rose 1.3 percent.