Emerging Stocks Drop as China Slumps, Greek Talks Remain StalledNguyen Kieu Giang and Maria Levitov
Emerging-market stocks fell for the first time in four days as Chinese equities slumped and concern grew that Greece may not reach a deal with creditors.
The Shanghai Composite Index plunged 3.5 percent, led by technology companies, after traders sold shares purchased with borrowed money for a third day. The Ibovespa tumbled as a surprise legal petition involving former President Luiz Inacio Lula da Silva underscored concern that a corruption probe could engulf Brazil’s ruling party. Hungary’s BUX index led declines in developing Europe, dropping 1.7 percent.
The MSCI Emerging Markets Index slipped 0.5 percent to 988.18. Officials meeting to try to work out a deal before the expiry this month of Greece’s euro-area bailout remained at odds over over pensions, sales-tax rates, debt relief and corporate taxes. They’re set to reconvene Saturday. Filings for U.S. unemployment benefits held below 300,000 for the 16th straight week, signaling economic strength that may push the Federal Reserve to raise borrowing costs soon.
“It is a combination of unknowns that makes it difficult for investors to price properly,” Simon Quijano-Evans, the head of emerging-market research at Commerzbank AG in London, said by e-mail. “If the Greece issue were to be dealt with, the next challenge appears, namely betting on what the Fed will do and when.”
Greece’s bailout expires on June 30. With no follow-on financing in place, the country may not be able to make a payment due the same day to the International Monetary Fund.
The developing-nation stock gauge has risen 3.3 percent this year and trades at 12 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 4.2 percent in the period and is valued at a multiple of 16.5.
The Ibovespa dropped 1.6 percent in Sao Paulo and the real weakened 1 percent against the dollar. Brazilian assets slumped after the newspaper Folha de S. Paulo reported that a legal measure aimed at preventing Lula from being arrested had been filed amid the country’s largest-ever graft probe. He later said the request had been filed without his knowledge and asked for it to be disregarded. Prosecutors said he isn’t a target of the probe.
All 10 industry groups in the emerging-markets measure fell Thursday. Malaysia’s Tenaga Nasional Bhd. led a 1.2 percent drop in utility stocks, sinking 1.7 percent to an eight-month low.
Russia’s Micex Index slipped 1.2 percent, while the dollar-denominated RTS Index declined 1.1 percent. The ruble weakened 0.5 percent against the dollar, falling for a second day as support from local tax payments waned and an extension of European Union sanctions over Ukraine renewed concern about companies’ ability to finance their foreign debts.
The FTSE/JSE Africa All Share Index added 0.1 percent in Johannesburg, gaining for a fourth day. Sasol Ltd. led the advance, rallying 1.8 percent.
The BUX index dropped 1.7 percent in Budapest. Turkish stocks slid 1 percent.
Hong Kong’s Hang Seng China Enterprises Index fell 1.6 percent and the Shanghai Composite slid 3.5 percent, sending a gauge of 30-day volatility to a seven-year high.
The decline in margin trading, in which investors borrow money to buy securities, comes as pressure grows on regulators to take measures to avoid a stock market crash. The Shanghai measure earlier gained after China’s government proposed ending a cap on lending.
The premium investors demand to hold emerging-market debt over U.S. Treasuries narrowed three basis points to 337 basis points, according to JPMorgan Chase & Co. indexes.
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