Bloomberg News

Emerging Stocks Decline in Largest Quarterly Drop Since 2008

September 30, 2011

Sept. 30 (Bloomberg) -- Emerging-market stocks fell, with the benchmark index posting its largest quarterly loss since 2008, after U.S. consumer spending slowed, German retail sales slumped and a gauge of Chinese manufacturing shrank for a third month, fueling concern global growth is slowing.

The MSCI Emerging Markets Index dropped 1.6 percent to 880.43 at 5:35 p.m. New York time, extending its quarterly loss to 23 percent. Brazil’s Bovespa Index slid 2 percent and Mexico’s IPC Index declined 0.5 percent. Russia’s Micex fell 2.9 percent, while Hungary’s BUX Index dropped 0.2 percent.

U.S. consumer spending increased 0.2 percent last month, down from 0.7 percent in July, as incomes dropped for the first time in almost two years, showing scarce jobs are preventing the U.S. economy from gaining ground, according to Commerce Department data released today. German retail sales fell the most since May 2007, the Federal Statistics Office said. The Chinese manufacturing gauge extended its longest contraction since 2009, as measures of new orders and export demand fell.

“The weak state of global growth data recently suggests further de-risking by investors” as they sell higher yielding emerging-market assets, said Nick Chamie, the global head of emerging-market research at RBC Dominion Secruties Inc. in Toronto. “A stabilization of the global economic environment is needed for a sustained rally beyond any temporary bounces we may see after the large outflows we’ve seen.”

Emerging-market equity funds posted a ninth week of outflows, with withdrawals almost doubling from the previous period, Citigroup Inc. said. MSCI’s emerging-markets gauge has dropped 15 percent in September, the most since October 2008. The index gained 2.2 percent this week.

Brazil Stocks

Brazilian miner Vale SA, whose top export market is China, declined 2.2 percent. OGX Petroleo & Gas Participacoes SA dropped 4.9 percent and Petroleo Brasileiro SA slid 1.6 percent, following crude prices lower. Consumer-goods maker Hypermarcas SA plunged 9.2 percent, leading declines for companies that depend on domestic demand.

Mexico’s Cemex SAB, the largest cement maker in the Americas, plunged 6.3 percent. Consumer spending in the U.S., which accounts for about 14 percent of the company’s revenue, slowed in August as incomes unexpectedly dropped for the first time in almost two years. Corporacion GEO SAB, Mexico’s second- largest homebuilder, dropped 6.6 percent.

Brazil’s real fell 2.1 percent against the dollar, bringing its quarterly loss to 17 percent, its worst quarter since 2008, while Mexico’s peso slid 1.4 percent.

The rand weakened 1.7 percent against the dollar, taking its monthly retreat to 16 percent and its quarterly loss to 20 percent. The ruble depreciated 0.7 percent. It has fallen 15 percent against the U.S. currency this quarter, the biggest drop since the three-month period ended March 2009.

Retail sales in Germany, adjusted for inflation and seasonal swings, slumped 2.9 percent last month from July, when they rose 0.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists had forecast a 0.5 percent decline, according to the median of 18 estimates in a Bloomberg News survey.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 15 basis points, or 0.15 percentage point, to 462, according to JPMorgan Chase & Co.’s EMBI Global Index.

-- With assistance from Weiyi Lim in Singapore. Editors: Linda Shen, Michael Patterson, Richard Richtmyer

To contact the reporters on this story: Drew Benson in New York at abenson9@bloomberg.net Jason Webb in London at jwebb25@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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