Emerging Markets Halt Gain as China Exports Damp Growth Optimism

  • Rand weakens as South Africa's current account deficit widens
  • Investors turn their attention to ECB's stimulus program

Emerging-market stocks ended a seven-day advance as the biggest drop since 2009 in Chinese exports underscored shrinking global demand.

The MSCI Emerging Markets Index halted its longest streak of gains in 11 months and a gauge of 20 developing-nation currencies retreated from the strongest level this year. Polish stocks fell from a three-month high as investors awaited the European Central Bank’s policy decisions on Thursday. Iron-ore producer Vale SA led Brazilian stocks lower. South Africa’s rand slumped as commodity prices dropped and the country’s current-account deficit widened more than economists forecast.

Chinese exports fell by more than 25 percent in February, data showed, tempering investors’ expectation for a quick rebound in the global economy. Slower trade is making it more difficult for China’s leaders, who are gathered in Beijing this week to set the nation’s economic plans, to keep growth at the targeted 6.5 percent to 7 percent range. Investors are now turning their attention to the ECB meeting where President Mario Draghi may announce an expansion of stimulus.

The Chinese data “suggest that global demand is still weak,” said Michael Wang, a strategist at hedge fund Amiya Capital LLP in London. “We are getting close to the end of the emerging-market rally but we may not be quite there yet, as oil could still keep rallying. We could also get some more central bank easing from the ECB this week and the Bank of Japan next week.” Wang said he favors Indian, Indonesian and Mexican shares.

Stocks

The MSCI developing-nation stock gauge fell 0.9 percent to 788.09. The index advanced 15 percent from Jan. 21 through Monday, spurred by a rebound in crude and some metals. Shares of raw-material producers slid the most among 10 industry groups Tuesday. The Bloomberg Commodity Index retreated 1.1 percent from the highest since Dec. 7. A rally in commodities from iron ore to gold will falter, according to a Goldman Sachs Group Inc. report, which forecast copper and aluminum prices will slide as much as 20 percent over the next year.

The emerging-markets stock measure trades at 11.5 times the projected earnings of its members, a 26 percent discount to advanced-nation shares.

The WIG 20 Index slipped 1 percent in Warsaw. Benchmark gauges in Oman, Bahrain and Nigeria each fell at least 0.5 percent. Vale retreated 1.5 percent as the Ibovespa equity benchmark ended a six-day advance in Sao Paulo.

Currencies

The currencies gauge declined 0.6 percent after climbing 3.2 percent in the previous six days. The rand weakened 1.1 percent against the dollar, while the Colombian peso declined 2.9 percent.

South Africa’s currency fell after data showed the current-account deficit widened more than expected, reaching 5.1 percent of gross domestic product in the fourth quarter. This was more than the 4.4 percent median estimate of 12 economists surveyed by Bloomberg.

The Indonesian rupiah weakened 0.4 percent after a 13-day advance, the longest streak of gains since 2010. The Bloomberg-JPMorgan Asia Dollar Index tracking the region’s 10 most-active exchange rates fell 0.2 percent. 

China’s yuan strengthened after the central bank raised its fixing for a fourth day and data issued late Monday showed a less-than-estimated drop in foreign-exchange reserves. The yuan rose 0.2 percent to 6.5057 per dollar in Shanghai, according to China Foreign Exchange Trade System prices. The offshore rate was little changed at 6.5084.

Bonds

Turkey’s two-year sovereign bonds rose, reducing the yield by five basis points. The notes have gone without a drop in 10 trading sessions as inflation slowed more than forecast.

The premium investors demand to own emerging-market debt over U.S. Treasuries widened seven basis points to 430, according to JPMorgan Chase & Co. indexes.

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