Bloomberg News

Emerging Stocks Drop to 13-Month Low on U.S. Data, Europe Debt

September 14, 2011

Sept. 14 (Bloomberg) -- Emerging-market stocks fell, sending the benchmark index to the lowest level in more than 13 months, on concern Europe’s debt crisis will sap demand and as data showed further signs the U.S. economy is slowing.

The MSCI Emerging Markets Index retreated 1.2 percent to 952.55 by 4:30 p.m. New York time, the lowest closing level since July 2010. The Kospi Index sank 3.5 percent, the most in Asia, as South Korean markets resumed trading after a two-day holiday. Taiwan’s TAIEX Index lost 2.2 percent, and Turkey’s XU100 gauge dipped 0.9 percent. Benchmarks in Indonesia, Malaysia and the Czech Republic also declined.

U.S. Commerce Department figures today showed retail sales unexpectedly stagnated in August, following a 0.3 percent gain for July, as a lack of jobs restrained shoppers. Another report from the department indicated business inventories rose less than forecast in July. European Commission President Jose Barroso said he is close to proposing options on joint euro-area bond sales, while Germany was against using euro bonds as a tool to help solve Europe’s debt problems.

“The U.S. data, somewhat disappointing, has dragged markets down a bit,” John Lomax, an emerging-markets strategist at HSBC Holdings Plc, said in a phone interview from London. “The sentiment is just very fragile. The European situation is still very unclear.”

20 Percent

The MSCI emerging markets measure entered a bear market yesterday, after falling 20 percent from this year’s high reached on May 2. The gauge has lost 17 percent this year, compared with an 11 percent drop in the MSCI World Index. Companies on the emerging-market benchmark are trading at 9 times estimated 12-month earnings, compared with 10.4 times for stocks in developed markets.

French President Nicolas Sarkozy and German Chancellor Angela Merkel said they are “convinced” Greece will remain in the euro area and that Greek budget cuts will restore stability to markets after they spoke to Greek Prime Minister George Papandreou by telephone today.

Earlier today, German Foreign Minister Guido Westerwelle told reporters in Berlin his nation is opposed to the euro bonds because “you can’t fight debt in Europe by making it easier to take up debt.”

U.S. Treasury Secretary Timothy F. Geithner will travel to a meeting of European Union finance ministers in Poland this week to urge them to step up their efforts amid Obama administration concerns that the region’s woes may hurt the U.S. economy.

Currencies Fall

Most currencies across emerging markets weakened against the dollar, led by the Indonesian rupiah with a 2.5 percent decline. Bank Indonesia “intervened in the rupiah and bond markets,” Deputy Governor Hartadi Sarwono said, adding that the central bank doesn’t want the currency to fall further.

South Africa’s rand depreciated 1.2 percent and the Korean won dropped 1.1 percent. Brazil’s real fell for a night day the longest losing streak since 2005. The real lost 0.3 percent to 1.7144 per dollar, the weakest level since November.

Brazil’s Bovespa Index advanced 1.3 percent, erasing earlier losses after the leaders of Europe’s two biggest economies issued the statement on Greece. Embraer SA, the world’s fourth-largest planemaker by sales, gained the most among companies in the benchmark. The shares surged 4.9 percent to the highest level in more than six weeks.

Poland, China

The MSCI EM Emerging Europe Index pared losses of as much as 1.1 percent after Zhang Xiaoqiang, a vice chairman of China’s top planning agency said the nation is still willing to buy bonds from crisis-hit nations, according to interview transcripts on the website of the National Development and Reform Commission.

PKO Bank Polski SA, Poland’s biggest bank, rose 1.5 percent in Warsaw, leading the WIG20 Index 0.7 percent higher. The BUX Index advanced 0.9 percent in Budapest after four consecutive days of decline. The Micex Index gained 0.5 percent in Moscow.

Chinese Premier Wen Jiabao said today developed countries “must first put their own houses in order” and not rely on bailouts from his nation.

The Asian Development Bank cut today its 2011 growth forecast for Asia excluding Japan to 7.5 percent from an April estimate of 7.8 percent, in part because of global risks.

Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, fell 3.5 percent in Seoul.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose five basis points, or 0.05 percentage point, to 3.90 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index.

--Editors: Linda Shen, Alex Nicholson, Marie-France Han

To contact the reporter on this story: Belinda Cao in New York at Lcao4@bloomberg.net Jason Webb in London at jwebb25@bloomberg.net.

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


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