Bloomberg News

Emerging-Market Stocks Fall to Three-Month Low; Lira Weakens

June 20, 2011

June 20 (Bloomberg) -- Emerging-market stocks fell for a fourth day, sending the benchmark index to its lowest level in three months, after European governments failed to agree on a loan payment to avert a default by Greece.

The MSCI Emerging Markets Index lost 0.5 percent to 1,098.33 at 5:04 p.m. in New York, the lowest close since March 17. India’s benchmark equity index sank 2 percent after a report the government may tax capital gains on investments routed through Mauritius. The Shanghai Composite Index slid to the lowest in almost nine months, while Russia’s Micex fell for a sixth day in the longest losing streak since October 2008. Turkey’s lira dropped 0.3 percent versus the dollar.

Euro-area finance ministers who met yesterday in Luxembourg put off a decision on whether Greece will get the full 12 billion euros ($17 billion) promised for July and pushed for the nation to press ahead with budget cuts. The MSCI emerging-market index has retreated 9 percent from this year’s high on May 2 amid growing concern that Europe’s debt crisis and a slowdown in the U.S. economy will curb earnings growth.

“The Greek issue and uncertainties over the U.S. demand” are weighing on investor sentiment, said Han Sang Soo, a fund manager at Samsung Asset Management Co. in Seoul, which oversees about $30 billion in assets. “More time will be needed to see a recovery.”

Brazil Stocks

The Bovespa stock index advanced, rebounding from two weeks of declines, after Moody’s Investors Service boosted Brazil’s debt rating. The benchmark index climbed 0.2 percent to 61,168.24. The real gained 0.1 percent to 1.5965 per dollar.

Cia. Energetica de Sao Paulo, the state-controlled power company known as Cesp, led gains for utilities. Cia. de Bebidas das Americas, Latin America’s largest brewer, increased for the first time in four days. Advances were partially offset as traders boosted bets for higher borrowing costs, sending down homebuilder PDG Realty SA Empreendimentos & Participacoes.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage point, to 319, according to JPMorgan Chase & Co.’s EMBI Global Index.

The Bombay Stock Exchange Sensitive Index dropped to a four-month low after the Business Standard reported that India will seek to tax capital gains on investments made through Mauritius. India wants to impose a tax because the gains are being made in India, said Prakash Chandra, chairman of the tax board, according to the Business Standard.

China’s Shanghai Composite lost 0.8 percent to the lowest level since Sept. 29 after Credit Suisse Group AG said the economy is heading for a “sluggish landing.” Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. paced declines after the brokerage cut its rating on lenders to “underweight” from “overweight.”

Micex Declines

Russia’s Micex index sank 1.2 percent, bringing its six-day drop to 3.9 percent. OAO Gazprom and OAO GMK Norilsk Nickel fell as oil and metals prices decreased earlier in the day.

The lira weakened after Turkey’s banking regulator increased costs for banks that exceed a new limit for consumer lending, the latest in a series of steps designed to slow credit growth and rein in a booming economy.

The Romanian leu slid 0.1 percent against the euro to its weakest level in four months, boosting speculation policy makers will act to prop up the currency. Greek lenders control about 17 percent of the Romanian banking industry. Romania’s central bank may buy the leu to stop further losses, according to UniCredit SpA and ING Groep NV.

--With assistance from Selcuk Gokoluk in Istanbul, Nathan Gill in Quito News and Alexander Cuadros in Sao Paulo. Editors: Stephen Kirkland, Brendan Walsh

To contact the reporters on this story: Saeromi Shin in Seoul at sshin15@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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