Bloomberg News

Emerging Stocks Decline on Greek Referendum; Currencies Weaken

November 02, 2011

Nov. 1 (Bloomberg) -- Emerging-market stocks fell, with the benchmark gauge poised for the biggest two-day drop in a month, on concern that a Greece referendum may threaten Europe’s bailout plan and worsen the region’s debt crisis.

The MSCI Emerging Markets Index declined 2.6 percent to 969.36 at 1:36 p.m. New York time, bringing the fall over the past two days to 4.1 percent, the most since the period ended Oct. 4. The Hang Seng China Enterprises Index slid 3.1 percent. Brazil’s Bovespa fell for the second day, retreating 2.9 percent after industrial production fell more than forecast. The Micex Index fell 2.8 percent in Moscow and Turkey’s ISE National 100 Index slid 2.2 percent, led by financial companies.

European leaders pressed Greece to uphold the terms of a five-day-old bailout in a bid to stop the deal unraveling on the eve of a global summit, after Prime Minister George Papandreou said he’d put the plan to a referendum. The vote poses a threat to financial stability in the region if rejected by voters.

“I don’t think anybody now believes that the Euro deal that was struck in the middle of last week was anything but a sticking plaster that’s not really going to do the job,” said Neil Shearing, a London-based senior emerging markets analyst at Capital Economics Ltd. “The market has gone through being cautiously optimistic at the end of last week to deeply pessimistic.”

The MSCI index pared losses of as much as 3.3 percent after Dow Jones Newswires reported that a Greek Socialist Party Official said the call for a referendum is “basically dead.”

‘Lasting Growth’

The European plan, designed to aid Greece and stem the wider debt crisis, is “more necessary than ever today,” German Chancellor Angela Merkel and French President Nicolas Sarkozy said in a joint statement issued in Berlin and Paris. Germany and France “are convinced that this agreement allows Greece to return to lasting growth” and want to draw up a road map for locking in the second Greek bailout.

Twenty-three of 25 emerging-market currencies tracked by Bloomberg declined today. The Mexican peso depreciated 1.6 percent against the dollar, the South African rand slid 1.2 percent and the ruble weakened by 1.8 percent.

The FTSE/JSE Africa All Share Index retreated 1.9 percent in Johannesburg and the BSE India Sensitive Index, or Sensex, lost 1.3 percent.

China’s Purchasing Managers’ Index fell to 50.4 last month from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement today. That was lower than any of 16 economist estimates in a Bloomberg News survey that had a median forecast of 51.8. A reading above 50 indicates expansion.

Property Stocks

Chinese property stocks fell in Hong Kong after a media report said some property developers are cutting prices. Evergrande Real Estate Group Ltd. shares fell 5.8 percent, while Longfor Properties Co. lost 5.2 percent.

PDG Realty SA Empreendimentos & Participacoes, Brazil’s biggest homebuilder, fell 3.3 percent in Sao Paulo, while Brookfield Incroporacoes SA, Brazil’s fourth-largest real-estate company by revenue, slumped 4.7 percent.

Oil producers OGX Petroleo E Gas Participacoes SA and Petroleo Brasileiro SA both declined as crude oil dropped 2.3 percent in New York to $91.06.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries jumped 10 basis points, or 0.10 percentage point, to 402, according to JPMorgan Chase & Co.’s EMBI Global Index.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps surged 24 basis points to 310, according to data provider CMA.

--Editors: Brendan Walsh, Alex Nicholson

To contact the reporters on this story: Ksenia Galouchko in New York at kgalouchko1@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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