Emerging Stocks Drop on China Curbs as Russia Stems Ruble RallyMaria Levitov and Ian Sayson
Emerging-market stocks fell for a second day as regulatory efforts to curb speculative trading in China dragged the nation’s shares from a 2008 high. The ruble slid as the central bank raised the cost of borrowing dollars.
China CNR Corp. and CSR Corp. plunged from records in Hong Kong and the Shanghai Composite Index declined the most in seven weeks. The ruble tumbled 2.7 percent against the dollar. The rupee posted its biggest drop this year as India’s trade deficit widened. Poland’s zloty rallied past 4 per euro after better-than-expected industrial output data.
The MSCI Emerging Markets Index retreated 0.9 percent to 1,033.77. China’s securities regulator announced steps on Friday to clamp down on the use of shadow financing for equity purchases and increase shares available for short sellers. That overshadowed a step by the People’s Bank of China to cut reserve requirements by the most since 2008 to shore up the economy after growth slowed to a six-year low.
“China’s regulator announced some measures on Friday, which were interpreted negatively,” Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki, said by e-mail. “Because Shanghai and also lately Hong Kong have performed so well, short-term investors take some profits. I would expect the trend to stay positive medium term.”
Stocks in Shanghai have traded at a 14-day relative strength index above 70 since March 17 as bets the government will announce stimulus sent the index up 77 percent in six months, the most among 93 benchmark gauges tracked by Bloomberg.
An index tracking 20 developing-nation currencies decreased 0.4 percent as currencies in India and Turkey lost at least 0.8 percent against the dollar.
The rupee declined 0.9 percent to 62.9162 per dollar and the S&P BSE Sensex Index lost 2 percent as Infosys Ltd. led software exporters lower. India’s trade gap reached $11.8 billion in March as overseas shipments dropped 21.1 percent from a year earlier, official figures showed after the end of trading on Friday.
The lira has weakened against the dollar in six of the past eight trading days as investor confidence in Turkish assets declines before an election in June. The nation’s central bank will keep interest rates on hold at a policy meeting on Wednesday, according to the median estimate of 23 analysts surveyed by Bloomberg.
The ruble tumbled to 53.335 per dollar after the Bank of Russia increased the rate it charges banks for dollars using 12-month repurchase agreements by 75 basis points. The currency has advanced 14 percent this year, the most in the world, and the nation’s bonds rallied in part as lenders used cheap central bank dollars to buy debt.
Central bank Governor Elvira Nabiullina began a $50 billion program in October to give lenders access to cash to repay external debt as U.S.-led sanctions over the conflict in Ukraine blocked their access to foreign capital markets.
Poland’s zloty gained 1 percent to 3.9896 per euro, after data showed March industrial production grew by 8.8 percent from a year earlier, while retails sales also beat estimates.
The Ibovespa retreated 0.4 percent in Sao Paulo in its third straight decline. Lender Itau Unibanco Holding SA contributed the most to the Brazilian benchmark’s drop on Monday, sliding 1.7 percent as economists increased their estimates of how much the country’s economy will contract this year.
Nine out of 10 industry groups in the MSCI Emerging Markets Index decreased, led by industrial companies. PetroChina Co. retreated from a seven-month high as the Hang Seng China Enterprises Index dropped the most since Jan. 19. China CNR and CSR tumbled at least 11 percent.
The Shanghai Composite lost 1.6 percent. Chinese authorities banned a source of financing for margin trades. The reserve-requirement ratio will be cut 1 percentage point from Monday, the People’s Bank of China said on Monday.
The developing-nation gauge stock index has rallied 8.1 percent this year, driving its valuation to 12.4 times projected 12-month earnings, near a five-year high, according to data compiled by Bloomberg. The gauge trades at a 27 percent discount to developed-country shares in the MSCI World Index.
The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed three basis points to 354 basis points on Monday, according to JPMorgan Chase & Co. indexes.