Bloomberg News

Emerging-Market Stocks Fall, Currencies Weaken Before Greek Vote

June 27, 2011

June 27 (Bloomberg) -- Emerging-market stocks fell, heading for the biggest monthly decline in a year as Greek lawmakers began to debate austerity measures and U.S. consumer spending unexpectedly stagnated in May.

The MSCI Emerging Markets Index dropped 0.3 percent to 1,112.54 at 4 p.m. in New York, bringing its retreat this month to 4.7 percent. Brazil’s Bovespa, Mexico’s IPC index and India’s Sensex rose, partially offsetting drops of more than 1 percent in the Czech Republic, Egypt and Thailand. Taiwan’s Taiex Index, Russia’s Micex and South Korea’s Kospi Index also fell. Hungary’s forint strengthened 1 percent against the dollar, while the Taiwanese Dollar depreciated 0.2 percent.

Technology companies led the retreat in stocks, with Samsung Electronics Co. and Powerchip Technology Corp. falling at least 2 percent. Greece’s parliament began a three-day debate today on a 78 billion euro ($111 billion) package of budget cuts and asset sales needed for the release of an international bailout loan payment. U.S. consumer spending grew at the slowest pace in 11 months, according to a Commerce Department report.

“There’s a high degree of uncertainty about Europe and about Greece specifically, on top of weakening growth indicators globally,” Nick Chamie, global head of emerging markets at RBC Capital Markets in Toronto, said by phone. “Until those two things are clear, markets are going to remain generally tentative.”

MSCI’s emerging-markets index has decreased 3.4 percent this year, while the MSCI World Index of developed-nation shares is little changed.

Chipmakers, Exporters

The extra yield investors demand to own developing-nation debt over U.S. Treasuries declined 13 basis points, or 0.13 percentage point, to 318, according to JPMorgan Chase & Co.’s EMBI Global Index. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa fell two basis points to 211.

The Bovespa rose 0.3 percent as Brazilian economists cut their 2012 inflation forecasts for the first time since February, a sign they’re more confident that the central bank will succeed in cooling the economy. Consumer prices will rise 5.15 percent next year, according to the median forecast in a June 24 central bank survey of about 100 economists published today. The figure was down from 5.18 percent in the previous week.

Homebuilder Cyrela Brazil Realty SA Empreendimentos e Participacoes advanced the most in one month, leading gains by companies that depend on credit growth.

Petrobras

Petroleo Brasileiro SA, Brazil’s state-controlled oil company known as Petrobras, rose 0.9 percent as it seeks to borrow about $47 billion by 2014 to develop the largest crude discovery in three decades in the Americas, Chief Financial Officer Almir Barbassa said today in Sao Paulo.

Semiconductor companies followed chip prices lower. Taiwan’s Inotera Memories Inc. lost 3.7 percent, Nanya Technology Corp. fell 4.7 percent and Powerchip Technology dropped 5 percent. South Korea’s Hynix Semiconductor Inc. sank 4.3 percent, halting five days of gains.

U.S. consumer spending was little changed in May, the weakest outcome since June 2010, according to Commerce Department figures today. Separate reports this week are forecast to show manufacturing cooled and housing purchases picked up even as property values continued to drop.

India, China

Samsung Electronics retreated 2 percent. Apple Inc. filed a patent lawsuit against South Korea’s biggest exporter of consumer electronics, escalating the legal dispute between the two companies regarding designs and technologies used in their best-selling mobile-phone devices.

Komercni Banka AS, the Czech unit of Societe Generale SA, and Erste Group Bank AG, Austria’s biggest lender, helped drag the Czech PX Index down 1.1 percent to a six-month low.

India’s Bombay Stock Exchange Sensitive Index climbed 0.9 percent, its best three-day rally since May 2010, as falling commodity prices eased inflation concerns.

China’s Shanghai Composite Index rose 0.4 percent to the highest level in a month after a cash shortage in China’s financial system eased and the nation’s biggest brokerages said equities are poised to rally. Shares also got a boost after Premier Wen Jiabao said in comments broadcast today by Hong Kong-based Cable TV that China could keep full-year inflation within 5 percent as tightening measures take effect.

--Editors: With assistance from Leon Lazaroff in New York. Marie-France Han

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net.

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


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