Bloomberg News

Emerging Stocks Fall on Global Growth Concern After Moody’s Cuts

February 15, 2012

Feb. 14 (Bloomberg) -- Emerging-market stocks fell after Moody’s Investors Service cut the debt ratings of six European nations and U.S. retail sales rose less than forecast, rekindling concern that Europe’s crisis may curb global growth.

The MSCI Emerging Markets Index lost 0.6 percent to 1,046.96 at the close in New York. The Shanghai Composite Index dropped 0.3 percent and the ISE National 100 Index slid 1.5 percent in Istanbul. Brazil’s Bovespa fell 1 percent as producers followed a drop in metal prices.

The U.K. and France may be stripped of their top Aaa ratings, Moody’s said as it reduced the debt rankings of countries including Italy, Spain and Portugal on concern economic weakness may threaten austerity programs and reforms. U.S. retail sales rose 0.4 percent in January, half the 0.8 percent gain forecast by economists in a Bloomberg survey, Commerce Department figures showed today.

“We’ve had a cautious day” as investors weigh the European downgrades and U.S. retail sales data, Neil Shearing, an emerging markets economist at Capital Economics Ltd. in London, said by phone. “There’s plenty of people sitting on the sidelines waiting to see how this will play out.”

The emerging-markets gauge pared losses of as much as 0.8 percent as Reuters reported that Greece’s conservative party leader will deliver a commitment to lenders tomorrow, citing a government source. Earlier, finance ministers canceled a meeting for tomorrow and Luxembourg Prime Minister Jean-Claude Juncker, chairman of the euro finance panel, said he hasn’t received assurances from Greek lawmakers about measures required for the 130 billion euro ($170 billion) bailout.

Russia, India, Brazil

In Brazil, miner Vale SA lost 1.9 percent and steelmaker Gerdau SA, which generated 37 percent of its third-quarter revenue from North America, fell 2.8 percent.

The BSE India Sensitive Index, or Sensex, added 0.4 percent as the nation’s inflation rate slowed more than expected.

The rally that’s boosted emerging-market stocks 14 percent this year may pause as sentiment is too optimistic and fund inflows reached the highest level in 15 months, according to Bank of America Corp. and Morgan Stanley. Investor holdings in emerging markets have climbed to a level that historically foreshadowed short-term underperformance, Michael Hartnett, the chief global equity strategist at Bank of America, wrote today.

Emerging-Market Inflows

Last week’s inflow into emerging-market stock funds increased the net investment in 2012 to $17 billion, compared with outflows of $11.4 billion for the same period of 2011, Cambridge, Massachusetts-based EPFR Global said in a report e- mailed on Feb. 10.

The MSCI emerging-markets gauge trades for 10.5 times estimated profits, compared with 12.6 times for the MSCI World index of developed nations.

Sri Lanka’s Colombo All-Share Index plunged 3.7 percent to 5009.96, the lowest level since August 2010. The gauge has slumped 18 percent this year, the most among 93 major benchmark gauges tracked by Bloomberg. Stocks and the rupee have fallen as the government scrapped a currency trading band to help conserve foreign-exchange reserves, and boosted fuel prices.

Twenty-four of 25 emerging-market currencies tracked by Bloomberg weakened against the dollar. Chile’s peso fell 1 percent and the South African rand depreciated 0.6 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries increased 2 basis points, or 0.02 percentage points, to 381 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

--With assistance from Jason Webb in London, Zhang Shidong in Shanghai and Rajhkumar K Shaaw in Mumbai. Editors: Marie-France Han, Brendan Walsh

To contact the reporters on this story: Gan Yen Kuan in Kuala Lumpur at ykgan@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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