Emerging Stocks Drop for Seventh Day as Growth Concern Deepens

  • South African bank stocks, rand plunge after minister is fired
  • Chinese commodity shares drop to seven-year low in Hong Kong

Emerging-market stocks fell for a seventh day, extending their worst streak of losses since August, on concern economies are faltering. South African banks plummeted the most in 14 years and Chinese commodity companies fell to the lowest level since the global financial crisis.

A gauge of six South African lenders slid to the lowest level since March 2014 after President Jacob Zuma fired Finance Minister Nhlanhla Nene, adding to economic strains caused by a plunge in metal prices, credit downgrades and power shortages. The rand and government bonds also tumbled. A measure of nine Chinese raw-material producers traded in Hong Kong fell to the lowest since December 2008 as investors speculated that growth in domestic consumption and services will fail to offset a manufacturing slowdown in the world’s second-largest economy. Brazilian stocks and the real slumped after Moody’s Investors Service signaled that the country’s credit rating may be cut to junk.

Analysts’ projections for full-year corporate earnings in emerging markets are near the lowest since 2009 as China’s economy cools, putting a drag on other commodity-dependent economies. Investors are holding back share purchases as the holiday season approaches and with six days to go to what may be the Federal Reserve’s first interest-rate increase in nine years.

“There are growth fears,” Aurelija Augulyte, a strategist at Nordea Markets in Copenhagen, said by e-mail. “Markets see the yuan and China as key risks.”

The MSCI Emerging Markets Index fell 0.8 percent to 789.02, pushing its seven-day decline to 4.4 percent. The measure’s 14-day relative strength index, a gauge of momentum, fell below the level of 30 that signals investor bearishness is peaking relative to historical averages. The benchmark is heading for a third weekly retreat as the Federal Reserve prepares to announce its interest-rate decision on Dec. 16.

Eight out of 10 industry groups in the developing-nation stocks gauge retreated on Thursday. The measure has slumped 17 percent this year, poised for its worst annual drop since 2011. It trades at 10.9 times the projected earnings of its members, a 31 percent discount to advanced-nation equities

In Johannesburg, the FTSE/JSE Africa Banks Index tumbled 14 percent, the biggest drop since October 2001. South Africa’s president took the economy closer to the brink of a junk credit rating after firing his finance minister in a move investors say may undermine fiscal credibility. Zuma removed Nhlanhla Nene from his post after 19 months without giving any reasons except to say that he would be moved to another key role. His replacement is David van Rooyen, a lawmaker who is little known to South Africans or investors.

China, Brazil

The MSCI China/Materials Index declined 2.4 percent. None of the nine stocks in the gauge rose. Zijin Mining Group Co. lost 4 percent, the biggest retreat since October. Among mainland shares, Metallurgical Corp. of China and China Minmetals Rare Earth Co. slid more than 4 percent. The Shanghai Composite Index declined 0.5 percent, erasing a gain of as much as 0.9 percent.

The Ibovespa declined 1 percent in Sao Paulo. The real weakened 1.7 percent against the dollar. The Moody’s warning comes almost two months after Standard & Poor’s cut Brazil to junk. Forecasts for an economic contraction this year have worsened, and a top lawmaker has moved to impeach President Dilma Rousseff, setting up a process that could take months and further distract legislators from acting on proposed fiscal reforms.

An index of 20 emerging-market currencies fell 0.4 percent to a record low. The South African rand led losses, tumbling 3.2 percent to the weakest ever against the dollar. South Africa’s government bonds fell, sending the yield on debt maturing in 2026 higher by 105 basis points to 9.87 percent. That is the highest since 2008.

The ruble gained for a third day, rising 0.3 percent as investors bet a decision by the Bank of Russia to keep monetary policy unchanged will support the currency. The Micex Index was little changed.

The premium investors demand to own emerging-market debt over U.S. Treasuries was narrowed one basis point to 402, according to JPMorgan Chase & Co. indexes.

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