Bloomberg News

Emerging-Market Stocks Fall, Paring October Rally; Ruble Weakens

November 01, 2011

??Oct. 31 (Bloomberg) -- Emerging-market stocks fell, paring the benchmark index’s biggest monthly gain since May 2009, as China’s premier vowed to maintain property curbs and investors speculated European leaders may struggle to end the debt crisis. ??The MSCI Emerging Markets Index dropped for the first time in seven days, losing 1.5 percent to 995 at 4:34 p.m. in New York. The Hang Seng China Enterprises Index fell 1.1 percent and Brazil’s Bovespa index tumbled 2 percent. Benchmark equity indexes in Russia and South Africa dropped more than 1.5 percent, while the ruble weakened 1.4 percent against the dollar as oil and metals prices declined. ??China’s Premier Wen Jiabao said the government will “firmly” maintain restrictions on real estate. The world’s biggest holder of foreign-exchange reserves can’t play the role of “savior” for Europe after the region’s leaders agreed last week to boost their bailout fund, China’s official Xinhua news agency said yesterday. The MSCI index has surged 13 percent this month, including a 9.8 percent jump last week, on speculation policy makers will take steps to maintain global growth. ??“There is more uncertainty about the implementation of the EU rescue plan,” Benoit Anne, head of global emerging markets strategy at Societe Generale SA, said in a phone interview. “There’s been growing concern about the next phase and about the EU’s ability to follow up with the delivery of the plan.”

Bond Yields

??The MSCI Emerging Markets Index gained 9.8 percent last week on speculation European leaders will contain the region’s debt crisis after a rescue fund was boosted to 1 trillion euros ($1.4 trillion) and investors agreed to a voluntary writedown of 50 percent on Greek debt. Group of 20 leaders will gather Nov. 3-4 in Cannes, France where euro-area governments will seek financial support for their crisis-fighting efforts. ??“Risk assets performed exceptionally well” last week, Nick Maroutsos, who oversees the equivalent of about $3 billion at Sydney-based Kapstream Capital, said in a Bloomberg Television interview. “As with any big party, the day after can be a bit sobering. We’re certainly not ready to sound the all clear yet.” ??The extra yield investors demand to own emerging-market bonds over U.S. Treasuries increased fourteen basis points, or 0.14 percentage point, to 391, 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 rose 10 basis points to 282, according to CMA in London. ??China’s local authorities should continue to strictly implement the central government’s real-estate policies in the coming months to let citizens see the results of the curbs, according to a statement on Oct. 29 following a State Council meeting chaired by Premier Wen.

Earnings Trail Estimates

??China Overseas Land and Investment Ltd., a developer controlled by the nation’s construction ministry, slumped 5.7 percent in Hong Kong trading. Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, sank 1.6 percent. China Construction Bank Corp., the nation’s second- largest bank by market capitalization, lost 0.7 percent. ??About 50 percent of the 243 companies in the MSCI emerging markets gauge that reported quarterly results since Oct. 11 trailed analysts’ estimates, compared with 34 percent for the MSCI World Index of developed-nation stocks, data compiled by Bloomberg show. ??China Railway Group Ltd., the nation’s biggest builder of train lines, tumbled 14 percent for the biggest decline in the MSCI EM index today. The company said yesterday that third- quarter profit fell 49 percent on increased financing costs. Acer Inc., the world’s fourth-largest computer maker, retreated 2 percent in Taipei after saying it expects global shipments to decline this quarter.

Lojas Renner, Vale

??Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, joined a rout for companies that depend on domestic demand after Morgan Stanley cut its recommendation, with shares tumbling 1.4 percent. Vale SA, the world’s largest iron-ore producer, dropped 2.1 percent, the most in more than a week, as metals prices slumped. ??Russia’s Micex Index of shares slid 1.8 percent, Poland’s WIG20 lost 1.6 percent and the Czech PX Index retreated 3.9 percent. South Africa’s FTSE/JSE Africa All Shares Index sank 1.7 percent, while the BSE India Sensitive Index slipped 0.6 percent. ??The ruble weakened for the first time in three days, while South Africa’s rand fell 2.9 percent and the Czech koruna depreciated 2.8 percent against the dollar. The Turkish lira retreated 1.6 percent, snapping a seven-day rally that was the longest since July 2010.

--?????Stephen Kirkland. Editors: Brendan Walsh, Marie- France Han

???????????????????? New York Ksenia Galouchko; London Michael Patterson

????????????????????? David Papadopoulos

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