Bloomberg News

Emerging Stocks Fall to 3-Month Low on Greece, Technology Tumble

June 17, 2011

June 17 (Bloomberg) -- Emerging-market stocks fell for a third day, sending the benchmark index to a three-month low, as technology companies tumbled and investors speculated Greece’s debt crisis will slow economic growth in Europe.

The MSCI Emerging Markets Index dropped 0.3 percent to 1,103.74 at 5 p.m. New York time, the lowest close since March 18. The gauge dropped 2.2 percent this week. MSCI’s index of emerging-market technology stocks sank 1.7 percent today after Hynix Semiconductor Inc. and LG Display Co. retreated. Russia’s Micex Index lost 1.5 percent as oil fell, while South Africa’s benchmark stock index slid 1.1 percent.

Former Federal Reserve Chairman Alan Greenspan said a default by Greece is “almost certain,” while Germany’s Angela Merkel and France’s Nicolas Sarkozy endorsed a plan to roll over maturing Greek debt. Waterloo, Ontario-based Research In Motion Ltd. fueled the selloff in technology stocks after saying revenue may drop for the first time in nine years.

“The wall of worry seems to be getting higher and higher for investors in the short term,” Shane Oliver, head of investment strategy at AMP Capital Investors Ltd, said in an e- mailed note. “The problems in Greece have intensified.”

Brazil’s Bovespa index rose 0.3 percent as reports showed consumer prices declined more than forecast. OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, rose the most in a month after saying it’s receiving offers for stakes in its Brazilian crude and natural-gas projects and expects a sale this year.

The MSCI gauge of emerging markets has fallen 4.1 percent this year, compared with a less than 0.1 percent gain in the MSCI World Index of developed-nation stocks. Shares in the MSCI emerging index are valued at 10 times analysts’ 12-month earnings estimates, the lowest level since March 2009, according to data compiled by Bloomberg.

Emerging Outflows

Emerging-market equity mutual funds had net withdrawals of about $829 million during the week ended June 15, Citigroup Inc. strategists led by Markus Rosgen wrote in a report today, citing data compiled by EPFR Global.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined four basis points, or 0.04 percentage point, to 320, according to JPMorgan Chase & Co.’s EMBI Global Index. The gauge closed at the highest level since Aug. 31 yesterday. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa declined four basis points to 204, according to CMA in London.

Emerging-market stocks pared some of their declines after French President Sarkozy, speaking at a press conference in Berlin with German Chancellor Merkel, said the so-called Vienna initiative for eastern Europe in 2009, which encouraged creditors to roll over expiring bonds, could be a model for helping Greece. The index had fallen as much as 0.8 percent.

Poland, Hungary

Poland’s WIG20 gained 0.6 percent and the Czech PX Index gained 0.2 percent. Hungary’s BUX Index added 0.1 percent.

Russia’s Micex retreated for a fifth day, as OAO Gazprom and OAO Lukoil declined. Crude for July delivery on the New York Mercantile Exchange dropped as much as $3.11 to $91.84 a barrel.

Hynix retreated 6.1 percent in Seoul after Korea Investment & Securities Co. said second-quarter profit will miss estimates, while LG Display sank 6.8 percent as UBS AG cut its rating on the liquid-crystal-display industry.

--With assistance from Jonathan J. Levin in Mexico City. Editors: Richard Richtmyer, Brendan Walsh

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net

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


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