Emerging Stocks Drop as World Bank Spurs Global Growth Concern

Emerging-market stocks fell for the second time in three days as the World Bank’s forecast for global-economic growth underscored weakness in Asia and Europe.

Southern Copper Corp. and Jiangxi Copper Co. fell at least 3.7 percent as prices for the metal slid to the lowest since 2009. Hyundai Mobis Co. fell the most since November as auto-industry companies dropped. Russia’s ruble ended a three-day retreat as a rebound in oil prices outweighed concern that Standard & Poor’s will cut the sovereign’s credit rating to junk. The real climbed to a one-month high as Brazilian retail sales rose.

The MSCI Emerging Markets Index dropped 0.4 percent to 955.73. The gauge is little changed since the start of 2015 as a plunge in Brent crude offset a bigger-than-forecast increase in Chinese exports. The measure has declined for the past two years.

“Global growth is in a precarious place at the moment,” Nathan Griffiths, who helps manage $1.2 billion of emerging-market equities at ING Investment Management in the Hague, said by e-mail. “Weak global growth is negative for EM assets given most countries are geared to faster global growth.”

The World Bank said the global economy resembles a train pulled by a single engine, the U.S., with other regions dragging. The Washington-based lender cut its 2015 forecast to 3 percent from 3.4 percent, reduced projections for the euro area and Japan, and predicted a 2.9 percent slump in Russia. In Moscow, Economy Minister Alexei Ulyukayev acknowledged the government risks losing its investment-grade rating.

Commodities Impact

A gauge of emerging-market commodity companies fell for a third day, the longest streak in four weeks. Raw-material prices touched a 12-year low after a decade-long bull market led producers to boost output and a stronger dollar diminished their allure to investors. Copper plunged as much as 8.7 percent, the steepest drop in more than six years.

“Copper historically is an indicator of the health of the global economy,” Alan Richardson, a Hong Kong-based investment manager at Samsung Asset Management Ltd., said.

Southern Copper dropped 3.7 percent to the lowest since December 2013. Jiangxi Copper fell 5.9 percent in Hong Kong. Vale SA, the world’s largest iron-ore producer, retreated 7.8 percent, contributing the most to the decline in the gauge of commodity companies. Hyundai Mobis slid 4 percent.

Junk Risk

The ruble rose 0.7 percent to 64.773 per dollar. It earlier fell more than 2 percent after Ulyukayev said there’s a “fairly high” risk S&P will cut the world’s biggest energy exporter to a non-investment grade. Oil’s collapse into a bear market is pushing Russia toward recession after U.S. and European Union sanctions over Ukraine shut companies out of foreign debt markets. The currency reversed its loss as crude rebounded from a 5 1/2-year low in New York on speculation prices fell more than justified.

In South Africa, the FTSE/JSE Africa All Share Index declined 2.8 percent. Sasol Ltd., the world’s biggest maker of motor fuel-from-coal, slid 4.9 percent.

The real appreciated 1 percent versus the dollar. Brazil’s retail sales rose 0.9 percent in November from the prior month, more than the median forecast of economists surveyed by Bloomberg, which called for a gain of 0.2 percent. The Ibovespa stock index retreated for a fourth day as exporters declined.

The Shanghai Composite Index fell 0.4 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong also dropped 0.4 percent.

Nine out of 10 industry groups in the emerging-markets gauge slid. The measure trades at 11.2 times the projected earnings of its members, data compiled by Bloomberg show. The MSCI World Index of developed markets is valued at 15.3 times.

The premium investors demand to hold emerging-market debt rather than U.S. Treasuries widened one basis point to 392 basis points, according to JPMorgan & Co. indexes.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE