Bloomberg News

Emerging Stocks Fall on Global Slowdown, European Debt Concern

October 03, 2011

Oct. 3 (Bloomberg) -- Emerging stocks extended losses after completing the worst quarterly drop since 2008 as concern mounted there will be a world economic slowdown and European leaders prepared to weigh the risk of a Greek default.

The MSCI Emerging Markets Index sank 3.2 percent to 852.24 at 4:38 p.m. New York time. The gauge lost 23 percent in the three months ended Sept. 30. The Hang Seng China Enterprises Index slumped 5.7 percent. Brazil’s Bovespa Index sank 2.9 percent while Argentina’s Merval Index plunged 7 percent. Benchmark stock indexes fell in India, Russia and across Eastern European markets.

European finance ministers meeting today grappled with how to shield banks from the debt crisis and mulled a further boost to the region’s rescue fund. German Finance Minister Wolfgang Schaeuble opposed moves to increase the scale of the fund, damping speculation of a breakthrough.

“Even though we are still far from 2008/09 lows, investors’ confidence seems almost as fragile as back then,” analysts at BNP Paribas SA including Bartosz Pawlowski in London, said in an e-mailed note.

The Greek government yesterday approved 6.6 billion euros ($8.7 billion) of austerity measures to cut the 2012 deficit to 6.8 percent of gross domestic product, which misses a goal previously set with the European Union, International Monetary Fund and European Central Bank.

Today was the original target for approving an 8 billion- euro loan payment to Greece, the sixth installment of a 110 billion-euro lifeline put together in May 2010. The decision was pushed back until mid-October as Greece seeks to repair its finances.

Currencies Weaken

Currencies in most developing nations weakened against the dollar. The Brazilian real fell 0.6 percent while Mexico’s peso dropped 1 percent. The ruble depreciated 1.2 percent against the dollar and the South Korean won weakened by 1.6 percent. The lira fell 1.6 percent after Turkish exports grew at the slowest pace in eight months and inflation decelerated, prompting speculation the central bank will cut rates. Brazilian oil companies Petroleo Brasileiro SA and OGX Petroleo & Gas Participacoes SA followed crude futures lower and contributed most to the drop in the Bovespa index. Miner MMX Mineracao & Metalicos SA posted the biggest drop among stocks in the gauge after its recommendation was cut at Morgan Stanley.

Cemex SAB, the largest cement maker in the Americas, tumbled 16 percent in Mexico City. Its decline prompted a halt in trading earlier today before the company filed a reglatory statement saying it had nothing to disclose.

Hungary

OTP Bank Nyrt., Hungary’s biggest lender, fell 5.9 percent on concern Hungarian municipalities will default on debt. The BUX Index, in which OTP has a 25 percent weighting, retreated 1.7 percent.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps rose nine basis points to 363, according to data provider CMA.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries jumped 15 basis points, or 0.15 percentage point, to 480, according to JPMorgan Chase & Co.’s EMBI Global Index.

Russia’s Micex Index declined 1.6 percent while the WIG20 Index fell 1.9 percent in Warsaw.

Tupras Turkiye Petrol Rafinerileri AS, Turkey’s sole refiner, rose 2.1 percent in Istanbul. The price of oil fell 2 percent in New York to the lowest level in more than a year.

A Chinese purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics last week, showed a third month of contraction.

Asian Stocks

Ping An Insurance Group Co. tumbled 13 percent in Hong Kong trading. China Overseas Land & Investment Ltd., a developer controlled by the nation’s construction ministry, dropped 11 percent.

Indonesia’s Jakarta Composite Index slid 5.6 percent and the SET Index retreated 5.1 percent in Bangkok.

The TAIEX Index slid 2.9 percent in Taipei.

HTC Corp., which derived 83 percent of its 2010 revenue from America and Europe, dropped 3.2 percent. Acer Inc., which got 63 percent of its revenue from North America and Europe in 2010, slumped 4.9 percent.

Markets in China and South Korea were closed for a holiday.

--With assistance from Tal Barak Harif and Belinda Cao in New York and Kana Nishizawa in Tokyo. Editors: Linda Shen, Ana Monteiro

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@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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