Emerging-Market Stocks Retreat as Investors Seek Safe Havens

  • Decline extends to second day as Turkey, South Africa drop
  • Latin America, Middle East and east Europe currencies slump

Are Europe Stocks at Recession Prices?

Emerging-market stocks fell for a second day amid renewed that global growth is faltering as traders awaited comments from Federal Reserve Chair Janet Yellen for clues about the strength of the U.S. economy.

The Micex Index fell to a two-week low in Moscow. South Africa’s benchmark slipped 2.2 percent. A gauge of 20 developing-nation currencies slipped as declines in the Russian ruble and Argentine peso offset gains in Asian currencies. Markets in China, Hong Kong, Taiwan, South Korea, Brazil and Argentina were closed for holidays.

Concern that China will struggle to manage its economic slowdown and oil-price declines have gotten 2016 off to a rocky start, driving Japanese sovereign bond yields to below zero for the first time as investors sought havens. Yellen is scheduled to deliver her semi-annual testimony to Congress starting Wednesday.

“The main worry is global growth,” said Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki, who prefers Indian shares and has been increasing Russian holdings on expectation that either the sanctions on Russia will be lifted or oil, the country’s main revenue-earner, will rise from current levels. “The silver lining here is that this should limit the pace of Fed hikes and weaken the dollar, which would be a relief for emerging-market currencies.”

Stocks

The MSCI Emerging Markets Index retreated 0.6 percent to 729.88. The measure has declined 8.1 percent this year and is trading at 10.7 times its estimated earnings, compared with 14.4 times for the MSCI World Index. Nine out of 10 industry groups in the developing-nation gauge dropped Tuesday, led by a 1.3 percent decline in consumer discretionary stocks.

Eurobank Ergasias, a Greek bank and today’s biggest decliner in the emerging-markets gauge, sustained loss for the sixth day and slumped 12 percent. The Borsa Istanbul 100 Index fell 0.8 percent to a two-week low.

India’s S&P BSE Sensex Index fell 1.1 percent. Philippine shares slid 1.9 percent as trading resumed after a holiday. Benchmark gauges for Abu Dhabi and Dubai dropped 1 percent.

Currencies

Mexico’s peso and Colombia’s currency each weakened more than 0.7 percent against the dollar. The Russian ruble dropped 1.4 percent as Brent crude extended declines to a fourth day.

A gauge of 20 emerging-market currencies has dipped 1.4 percent this year as China’s slowdown and tumbling oil prices hurt earnings outlooks for commodity-producing countries. The Group of 20 nations will discuss ways to coordinate their exchange-rate policies at a meeting this month, European Central Bank Executive Board member Benoit Coeure said in an interview with French television network BFM on Monday.

The extra yield investors require to hold emerging-market debt over Treasuries increased two basis points to 493, according to JPMorgan Chase & Co. indexes.

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