Bloomberg News

Emerging Stocks Fall on China Profit Concern, Italian Yield Rise

December 28, 2011

Dec. 27 (Bloomberg) -- Emerging-market stocks dropped after profit growth at China’s industrial companies slowed and as Italian bond yields rose above 7 percent, raising concerns about Europe’s ability to tame the debt crisis.

The MSCI Emerging Markets Index fell 0.4 percent to 924.28 by 5 p.m. in New York. China’s Shanghai Composite Index retreated 1.1 percent, while South Korea’s Kospi Index fell by 0.8 percent, partly because of losses triggered by what exchange officials said was possibly an “erroneous” trading order. Brazil’s Bovespa Index gained 0.6 percent after U.S. consumer confidence topped forecasts.

Reports today showed Chinese industrial companies’ profit growth slowed as the lingering debt crisis in Europe and a cooling domestic property market dimmed the economic outlook, while South Korean consumer confidence fell to a three-month low. Italian government bonds fell before the nation prepares for another auction. International Monetary Fund Managing Director Christine Lagarde said the world economy is in danger because of Europe’s financial woes.

“It’s almost certain global growth next year will slow as the European crisis hasn’t been resolved yet,” Fadlul Imansyah, who manages about $165 million at PT CIMB Principal Asset Management in Jakarta, said today.

The MSCI Emerging Market Index has lost 20 percent this year as Europe’s debt problems compounded concerns about slowing global growth. Shares on the developing nation index are trading at 10.1 times estimated earnings, compared with 12.2 times on the MSCI World Index, which has fallen 7.5 percent this year.

Russia Tensions

Russian stocks declined on concern slower global economic growth and political tensions before the presidential vote will reduce demand for the country’s securities. The Micex Index fell 0.3 percent in Moscow. The ruble weakened against the dollar, slipping 1 percent.

The BUX gauge of 11 companies dropped 0.9 percent in Budapest, led by OTP Bank Nyrt, the biggest bank, and Gedeon Richter Nyrt., the country’s largest drugmaker.

The Polish zloty appreciated the most in eight weeks against the euro on speculation that Polish policy makers will support the currency this week.

The Bovespa stock index gained as data signaling the U.S. economy is continuing to recover lifted oil prices and boosted the outlook for Brazilian producers. Petroleo Brasileiro SA and OGX Petroleo & Gas Participacoes SA followed crude higher after oil rose 1 percent.

North Korea

Confidence among U.S. consumers rose in December to the highest level in eight months as an improving job market helped regain all the ground lost following the mid-year government budget battle and credit-rating downgrade. Another report showed that residential real estate prices dropped more than forecast in the year ended October.

In Seoul, LG Electronics Inc., the world’s third-biggest mobile-phone maker, retreated 2.4 percent. Samsung Electro- Mechanics Co., a maker of electronic parts, plunged 6.8 percent, the most since Aug. 19, after Woori Investment & Securities Co. said its sale of a stake in Samsung LED Co. for 283 billion won ($245 million) was lower than estimated. The Kospi Index dropped the most in a week.

“An investor, which we can’t verify yet, appears to have placed an erroneous order,” La Sung Chae, an official at the market trading analysis team at Korea Exchange Inc., said by phone. “That, combined with unconfirmed rumors about the health of the new leader of North Korea and that China may send troops to the communist nation, drove the index sharply lower. I think it seems a one-time occurrence.”

Consumer Confidence

South Korean consumer confidence fell to a three-month low in December on concern the political outlook in the North will worsen in the wake of Kim Jong Il’s death. The sentiment index fell to 99, from 103 in November, the Bank of Korea said in an e-mailed statement. A reading of less than 100 indicates pessimists outnumber optimists.

King Yuan Electronics Co., which provides integrated circuit testing services to semiconductor producers, rallied 5.6 percent in Taipei trading to the highest close since Dec. 5. King Yuan said it plans to buy back 30 million shares in a statement to the stock exchange.

PAL Holdings Inc. jumped 16 percent in Manila trading, the sharpest gain since July. San Miguel Corp. is in talks to invest in PAL unit Philippine Airlines Inc., ABS-CBN News reported, citing people it didn’t identify. San Miguel officials signed an agreement to start due diligence on the airline company, ABS-CBN said. San Miguel President Ramon Ang didn’t immediately reply to mobile-phone messages seeking comment while Philippine Air President Jaime Bautista said he’s not aware that the company signed an agreement with San Miguel Corp.

The market in Hong Kong was closed for a public holiday.

--With assistance from Tal Barak Harif in New York. Editors: Brendan Walsh, Marie-France Han


#<228860.7949211.># -0- Dec/27/2011 23:36 GMT

To contact the reporter on this story: Berni Moestafa in Jakarta at

To contact the editor responsible for this story: Gavin Serkin at

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