Bloomberg News

Emerging Stocks Drop, Entering Bear Market, on Greece Debt Woes

September 13, 2011

Sept. 13 (Bloomberg) -- Emerging-market stocks fell, with the benchmark index entering a bear market by slumping 20 percent down from its May peak, on concern Greece will default and deepen the global economic slowdown.

The MSCI Emerging Markets Index dropped 0.6 percent to 964.43 at 4:30 p.m. New York time, the lowest close since August 2010. The Shanghai Composite Index slipped 1.1 percent and the Taiex Index slid 2.9 percent in Taipei as trading returned after holidays in the two markets. Benchmark indexes in Brazil and Hungary declined.

The chance of a default by Greece in the next five years has soared to 98 percent, credit-default swaps showed. The so- called troika of the International Monetary Fund, European Central Bank and European Commission representatives will return to Greece this week, German Chancellor Angela Merkel said in an interview with Berlin-based broadcaster Inforadio.

Greek Prime Minister George Papandreou will hold a conference call with Merkel and French President Nicolas Sarkozy tomorrow to discuss developments in Greece and the euro area, his office in Athens said.

Italy’s Treasury sold five-year bonds at an average yield of 5.6 percent, compared with 4.93 percent on July 14, the last time securities of a similar maturity were sold.

“With the Greek drama yet to conclude and the market uncertain of the end game, risk reduction has been in full force,” analysts at BNP Paribas SA including Bartosz Pawlowski in London wrote in an e-mailed report. “The focus remains on developments in the euro zone.”

Index Drops

The MSCI emerging-market index has dropped 16 percent this year, more than the 11 percent decline by the MSCI World Index of developed stocks. Companies on the emerging-market gauge are trading at 9.1 times estimated 12-month earnings, compared with 10.2 times for stocks in developed markets.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell six basis points, or 0.06 percentage points, to 3.83 percentage points, according to JPMorgan’s EMBI Global Index.

Industrial & Commercial Bank of China Ltd., the world’s biggest bank by market value, declined 1 percent. Foxconn Technology Co. sank 6.4 percent in Taipei after the computer- case maker reported sales in August more than halved. HTC Corp., Asia’s second-largest smartphone maker, lost 4.9 percent in Taiwan after the stock was lowered to “neutral” from “overweight” at JPMorgan Chase & Co.

The BSE India Sensitive Index fell 0.2 percent in Mumbai. South Korea’s market was shut.

Bovespa Slumps

The Bovespa index fell 0.3 percent, its third day of declines, as prospects for further interest-rate cuts diminished after Brazil’s retail sales rose more than analysts forecast. Retail sales rose 1.4 percent in July from the previous month, the national statistics agency said today. That compares to a median projection for a 1 percent increase among 32 economists surveyed by Bloomberg.

Lojas Renner SA and BR Malls Participacoes SA led declines for companies that depend on domestic demand as traders drove up yields on interest-rate futures.

Hypermarcas SA, Brazil’s fifth-largest consumer-goods company by market value, fell 1.2 percent.

Oil rose for a second day in New York before data forecast to show that crude supplies declined a second week in the U.S., the largest consumer of the commodity.

The ISE National 100 Index rose 1.9 percent in Istanbul and the lira climbed by 1.1 percent versus the dollar.

Turkish stocks are expensive and will only rally when the European sovereign-debt crisis diminishes, JPMorganCazenove said.

The nation’s shares trade at around 8.5 times their estimated 12-month forward price-to-earnings ratio and investors could find “a lot of places that are cheaper than Turkey in absolute terms as well as cheaper relative to their own histories,” wrote JPMorgan analyst David Aserkoff in a report, giving Russia and Poland as cheaper examples.

South Africa’s rand appreciated 1.5 percent versus the dollar, snapping a three-day losing streak.

--With assistance from Belinda Cao and Tal Barak Harif in New York, Rishaad Salamat in Hong Kong, Zhang Shidong in Shanghai and Weiyi Lim in Singapore. Editors: Linda Shen, Ana Monteiro, Marie-France Han

To contact the reporter on this story: Ian Sayson in Manila at; Jason Webb in London at

To contact the editor responsible for this story: Darren Boey at

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