Bloomberg News

Emerging Stocks Fall as Greek Talks Continue, IMF Warns on China

February 07, 2012

Feb. 6 (Bloomberg) -- Emerging-market stocks fell as Greek leaders debated spending cuts needed to obtain more financial aid and the International Monetary Fund said China’s economic growth may almost halve should Europe’s debt crisis worsen.

The MSCI Emerging Markets Index retreated 0.1 percent to 1,047.22 in New York, the first drop in five days. Romanian stocks slid the most in more than two months after the prime minister resigned. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong fell 0.4 percent. Most stocks fell on Brazil’s benchmark Bovespa index, and the Micex Index dropped for the first time in five days in Moscow.

Greek Prime Minister Lucas Papademos struck a tentative deal with party leaders to extend spending cuts after euro-area finance chiefs said an increase in the nation’s aid package wasn’t forthcoming. Chinese economic growth would be cut almost in half should Europe’s debt crisis worsen and sap demand for the country’s exports, the IMF said in a report released today.

“We often have heard from Greece and officials in general that a solution is nearby, but in fact we have not heard about any solution yet,” Daniel Lenz, chief emerging market strategist at DZ Bank AG, said by phone from Frankfurt. “If it fails and Greece is headed for a default, we might see a significant profit-taking.”

The MSCI Emerging Markets Index climbed 3.1 percent last week, a fifth weekly gain and the longest stretch since October 2010. The gauge rallied 11 percent last month, its biggest January advance in 11 years, compared with a 4.9 percent advance by the MSCI World Index of developed-nation stocks. The MSCI World trades for 12.5 times earnings, compared with 10.3 for the emerging-nations’ measure.

OGX, China Petroleum

The iShares MSCI Emerging Markets Index, an exchange-traded fund of developing-nation stocks, slipped 0.9 percent today to $43.51, the biggest one-day drop since Jan. 30.

Forty stocks declined on the Bovespa, while 27 gained, leaving the gauge little changed at 65,223.72. Oil company OGX Petroleo & Gas Participacoes SA and petrochemical producer Braskem SA fell as crude prices dropped.

China Petroleum & Chemical Corp. led declines in Chinese stocks in Hong Kong, sliding 2.9 percent. Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, fell 1.3 percent.

A worsening European debt crisis would slow Chinese growth, warranting “significant” fiscal stimulus from the nation’s government, the IMF said today. Europe, China’s biggest export market, accounts for 18 percent of Chinese shipments, according to Shanghai-based Shenyin & Wanguo Securities Co.

Romanian Ouster

Romania’s benchmark BET Index fell 1.2 percent, the biggest drop since Nov. 28. Prime Minister Emil Boc quit his post in a televised speech, after protests over his government’s austerity measures turned violent and lenders ended a review of the nation’s international bailout loan.

The Philippine Stock Exchange Index jumped 1.2 percent after the central bank cut lenders’ reserve-requirement ratios. The amount banks must set aside in reserve will be lowered by three percentage points to 18 percent of deposits from April 1, according to a Feb. 3 statement from Bangko Sentral ng Pilipinas. This is the first cut in the ratio since 2008.

Twenty-two of 25 emerging-market currencies tracked by Bloomberg depreciated against the dollar. South Africa’s rand lost 0.5 percent and the Indian rupee weakened 0.7 percent. The ruble strengthened 0.2 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 390 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

--With assistance from Shikhar Balwani in Mumbai. Editors: Marie-France Han, Emma O’Brien

To contact the reporters on this story: Jason Webb in London at jwebb25@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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