Bloomberg News

Emerging-Market Stocks Fall Fifth Day in Six on Economy Concern

June 08, 2011

June 8 (Bloomberg) -- Emerging-market stocks fell, pushing the benchmark index down for the fifth day in six, after the World Bank said developing nations need to accelerate interest- rate increases and Federal Reserve Chairman Ben S. Bernanke gave no sign of new stimulus to boost U.S. growth.

The MSCI Emerging Markets Index retreated 0.6 percent to 1,145.47 as of 4:30 p.m. in New York, the lowest close since May 26. Thailand’s SET Index fell 1.9 percent after Credit Suisse Group AG said it’s “less optimistic” about that market. The WIG20 Index of Polish shares slid 0.4 percent as the central bank raised borrowing costs for the fourth time this year. Brazil’s Bovespa fell 0.3 percent.

Real interest rates, which take inflation into account, are low or negative in many emerging markets, according to the World Bank. The Washington-based lender lowered its growth forecast for the world economy this year to 3.2 percent from a January estimate of 3.3 percent. Bernanke said yesterday that the recovery remains “frustratingly slow,” while giving no indication he was planning a third round of asset purchases known as quantitative easing.

“A recent slowdown in some economic indicators, ongoing European debt issues and concerns about the end of quantitative easing in the U.S. all got tangled up to affect investors’ sentiment,” said Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees $29 billion. “Volatility will be here for a while.”

2011 Loss

The MSCI index has lost 0.5 percent this year as investors speculated Europe’s debt crisis and reduced economic stimulus efforts by governments worldwide will threaten earnings growth. The 21-country gauge is valued at 10.4 times analysts’ estimates for profits during the next 12 months, down from 11.6 at the start of the year, according to data compiled by Bloomberg.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose three basis points, or 0.03 percentage point, to 314 today, according to JPMorgan Chase & Co.’s EMBI Global Index.

Peru’s benchmark index gained for a second day, paring a record 12 percent loss on June 6, as president-elect Ollanta Humala said he may ask current central bank President to stay in his post, signaling to investors that his government won’t scrap policies that led to the region’s fastest economic growth. The sol strengthened 0.5 percent against the dollar.

Polish Rate Decision

The MSCI China Index dropped 1 percent, while India’s Bombay Stock Exchange Sensitive Index slid 0.5 percent. South Korea’s Kospi declined 0.8 percent as Samsung Electronics Co., the consumer-electronics company that gets more than 80 percent of its revenue from overseas, fell 1.1 percent.

Emerging-market economies, growing almost three times faster than their developed counterparts, need to speed spending cuts and interest-rate increases as they fight inflation and overheating, the World Bank said.

Poland’s central bank raised the benchmark seven-day interest rate by a quarter point to 4.5 percent, matching the expectations of 26 of 33 economists surveyed by Bloomberg. Seven analysts estimated the rate would remain unchanged.

The Polish zloty fell 1 percent versus the greenback, the second most among major emerging-market currencies, after the Romanian leu.

Thailand’s benchmark stock gauge fell for a seventh day, its longest losing streak since January 2010, after Credit Suisse cited concern that July 3 elections will fuel political instability.

Bangkok Bank Pcl, Thailand’s biggest lender, lost 2.3 percent, and Land & Houses Pcl, the largest property developer, slid 3.4 percent after Credit Suisse reduced its weighting on banks, property and tourism-related companies.

--With assistance from Belinda Cao in New York and Michael Patterson in London. Editors: Stephen Kirkland, Brendan Walsh

To contact the reporters on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net; Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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