Bloomberg News

Emerging-Market Stocks Post Longest Losing Streak Since 2009

November 24, 2011

Nov. 23 (Bloomberg) -- Emerging-market stocks fell, posting the longest losing streak since early 2009, as the cost of insuring European government debt against default rose to a record and reports on Chinese and European manufacturing and U.S. economic growth signaled global growth is faltering.

The MSCI Emerging Markets Index slid 2.6 percent to 885.26 at 5:15 p.m. New York time. The gauge has decreased for seven straight days, the longest stretch of declines since the period ended Jan. 15, 2009. The Bovespa dropped 1.6 percent while Chile’s benchmark fell 2.7 percent. The Hang Seng China Enterprises Index lost 2.8 percent while South Korea’s Kospi Index and Taiwan’s Taiex sank more than 2 percent.

Reports showed European manufacturing and services output fell for a third month in November while China’s manufacturing may contract this month by the most in almost three years. The costs to insure European government debt rose to a record after a German bund auction fueled concern the debt crisis is worsening. Orders for U.S. durable goods dropped 0.7 percent in October and initial jobless claims rose. The Commerce Department said yesterday the U.S. economy expanded less than economists estimated in the third quarter.

“Everybody is looking at what’s happening in the developed countries, especially with the rather weak U.S. GDP data from yesterday having negative influence,” said Daniel Lenz, the chief emerging markets strategist at DZ Bank AG in Frankfurt. “The market is now testing a new record low, and I only see a chance for a turnaround when we have a solution in Italy and France, if they come up with a strong commitment on the fiscal side.”

German Auction

The debt crisis that began more than two years ago now risks engulfing Germany. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose to an all- time high as Germany failed to find buyers for 35 percent of the bonds offered at an auction.

Mining stocks led declines in South Africa as copper decreased as much as 3 percent after European and Chinese economic data fueled concern demand might weaken.

Manufacturing in China, the world’s biggest consumer of copper, may shrink this month by the most since March 2009 as home sales slide, a preliminary purchasing managers’ index from Markit and HSBC Holdings Plc showed.

Vale, Anglo American

The Bovespa stock index fell for a fifth day as a report showed manufacturing may shrink the most in more than two years in China, Brazil’s biggest trading partner. Miner Vale SA, whose top export market is China, sank 2.5 percent. The real weakened 2.6 percent to 1.8662 per U.S. dollar.

Anglo American Plc, which makes up about 9 percent of South Africa’s benchmark index, dropped as much as 3.3 percent in Johannesburg trade, and BHP Billiton Ltd., the world’s biggest mining group, fell 2.6 percent. KGHM Polska Miedz SA, the copper producer with the biggest European mine output, slumped 4.8 percent in Warsaw.

Poland’s WIG20 index declined 1.7 percent while South Africa’s FTSE/JSE Africa All Share Index retreated 1.3 percent.

Consumer spending in the U.S. rose less than forecast in October, while orders for durable goods fell as demand for aircraft and business equipment cooled. More Americans than forecast filed for unemployment benefits last week.

Forint, Lira Weaken

The Hungarian forint sank 2.9 percent against the dollar. The lira retreated 1.2 percent after Turkey’s outlook was cut to “stable” from “positive” by Fitch Ratings.

The selloff in emerging-market currencies has just started and the magnitude of the decline in Brazil’s real and South Korea’s won may surprise investors, said Stephen Jen, a managing partner at SLJ Macro Partners LLP.

Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, slid 2.9 percent on speculation exports will drop as growth in the world’s biggest economy slows.

India’s Sensex retreated 2.3 percent to 15,699.97 in Mumbai, the lowest close in two years.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 7 basis points, or 0.07 percentage point, to 438, 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 rose 16 basis points, or 0.16 percentage point, to 380, according to data provider CMA.

--With assistance from Rajhkumar K Shaaw in Mumbai and Weiyi Lim in Singapore. Editors: Marie-France Han, Glenn J. Kalinoski

To contact the reporters on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net; Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

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


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