Emerging Stocks Fall as Ruble Sinks After Russia Rate IncreaseZahra Hankir and Choong En Han
Emerging-market stocks declined for a fifth day as the ruble slumped to a record low after Russia raised interest rates. Energy producers slid after crude headed for a five-year low.
The ruble fell 2.8 percent versus the dollar amid speculation the rate increase won’t be enough to stem the currency’s 41 percent slide this year. Russia’s dollar-denominated RTS Index plunged 3.6 percent. Abu Dhabi’s stock market decreased the most since 2009, while Dubai’s tumbled 7.4 percent.
The MSCI Emerging Markets Index fell 1.3 percent to 946.04, extending a 2.9 percent slump in the previous four sessions. Russia’s central bank raised its key rate by 100 basis points to 10.5 percent, the fifth increase in 2014, matching the median estimate of economists on Bloomberg.
“Unless the situation improves dramatically, they’ll have to raise another 100 basis points next time,” Richard Segal, head of emerging-market credit strategy at Jefferies International Ltd. in London, said by e-mail. “The central bank obviously can’t do much about expectations.”
Developing-country stocks have fallen 14 percent from this year’s high in September as the Federal Reserve ended bond buying and speculation grew that U.S. interest rates will rise next year. The MSCI Emerging Market Index’s 50-day historical volatility surged to the highest since April on Dec. 1, data compiled by Bloomberg show.
The ruble traded at 55.44 against the dollar, while the Micex Index slid 2.1 percent. Central bank Governor Elvira Nabiullina has raised rates 500 basis points since President Vladimir Putin’s incursion into Crimea in March.
“There is not much the central bank can do,” Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki, said by e-mail. “It’s politics and oil that are driving the ruble.”
Benchmark U.S. oil prices dropped below $60 a barrel for the first time since July 2009 as Saudi Arabia questioned the need to cut output, bolstering speculation that OPEC’s biggest producer will defend market share. Crude’s collapse into a bear market has been exacerbated as OPEC’s three largest members offered discounts on exports to Asia.
Dubai Islamic Bank PJSC lost 9.1 percent. In Abu Dhabi, Aldar Properties PJSC fell 10 percent. Saudi Arabia’s Tadawul All Share Index slid 0.2 percent in the fifth day of declines.
Equities in Hungary and the Czech Republic slipped at least 0.9 percent, while the forint depreciated 0.3 percent against the euro. Hungary’s consumer price index for November decreased more than economists estimated following a decline in vehicle fuel prices, data showed today.
All 10 industry groups in the emerging-market gauge dropped today, with an index of energy producers sliding 2.3 percent to its lowest level since March 2009.
Brazil’s real declined 1.4 percent to a nine-year low. The country’s Ibovespa stock gauge gained 0.6 percent, ending a three-day decline as meatpacker JBS SA led gains in exporters.
The Hang Seng China Enterprises Index retreated 1 percent, while the Shanghai Composite Index lost 0.5 percent. Thailand’s SET Index slid 2.1 percent, while South Korea’s Kospi dropped 1.5 percent.
The MSCI developing-nation gauge has fallen 5.7 percent this year and trades at 10.8 times 12-month estimated earnings, data compiled by Bloomberg show. The MSCI World Index has gained 2.3 percent and is valued at a multiple of 15.2.
The premium investors demand to own emerging-market debt increased one basis point to 356 basis points, JPMorgan Chase & Co. Indexes show.