Bloomberg News

Emerging Stocks Drop Most This Week as Greece Delay Dims Outlook

February 17, 2012

Feb. 16 (Bloomberg) -- Emerging-market stocks sank, pushing the benchmark index down the most this week, as a delay on Greece’s second bailout and less foreign investment in China dimmed the outlook for the global economy and riskier assets.

The MSCI Emerging Markets Index fell 0.9 percent to 1,049.24 at the close in New York, the biggest drop since Feb. 10. Metals companies led declines, as Aluminum Corp. of China Ltd. and Jiangxi Copper Co. fell the most in at least a week, and AngloGold Ashanti Ltd. dropped to a four-month low. OAO Mechel, Russia’s largest coking coal producer, hit a one-month low. Brazil’s Bovespa index reached the highest since April after companies reported profit that exceeded estimates.

European governments are considering reducing rates on emergency loans to Greece and using contributions from the European Central Bank to augment a second bailout for Athens, two people familiar with the discussions said. Finance ministers are looking for solutions after seeing estimates that Greece’s debt would fall to 129 percent of gross domestic product in 2020, missing the 120 percent target. Foreign direct investment into China fell in January for the third month, Commerce Ministry data showed.

“Today is rather influenced by a bit of disappointment about the way discussions about Greece are going,” John Lomax, an emerging-markets strategist at HSBC Holdings Plc, said by phone from London. “The most likely catalyst for markets looking ahead is that these talks do in fact resolve themselves and that Greece can manage the redemptions in the middle of March.”

Vale Profit

Emerging-market stocks have gained 14 percent this year, beating the 8.3 percent gain for developed-market shares. The MSCI developing-nation index trades at 10.6 times estimated earnings, below the 12.7 ratio for developed-country stocks on the MSCI World gauge.

U.S. stocks jumped and emerging-market shares pared losses as jobless claims slid to a four-year low in the world’s largest economy, while housing starts topped forecast. A measure of manufacturing in the Philadelphia area expanded at the fastest pace in four months, adding to signs of U.S. resilience.

Brazil’s Bovespa index gained 1.2 percent to the highest since April 27, as state-controlled oil producer Petroleo Brasileiro SA jumped 3.4 percent.

The Shanghai Composite Index retreated 0.4 percent, the most in more than a week. Aluminum Corp., China’s biggest producer of the metal, lost 0.7 percent in Shanghai, while Jiangxi Copper dropped 1 percent.

An index of metal prices fell to the lowest in a month today. The Bloomberg Forward Global Base Metal Index has gained 9.3 percent this year after slumping 22 percent last year, the biggest annual drop since 2008.

Erste Picked

The Moscow-based Micex Index retreated 0.6 percent, and Mechel lost 4.2 percent to the lowest close since Jan. 18.

The PX Index fell 1.1 percent in Prague, as Erste Group Bank AG slipped 0.8 percent. Moody’s said in a statement today that it may cut the lender’s standalone and long-term debt ratings. The move comes as part of a review of ratings at 114 financial institutions in 16 European countries, the ratings company said.

About 44 percent of emerging-market companies tracked by Morgan Stanley have missed analysts’ fourth-quarter earnings estimates, compared with the 29 percent that have beaten them, analysts Jonathan Garner and Pankaj Mataney wrote in a report dated yesterday.

South Korea

Taiwan’s Taiex Index fell 1.7 percent and South Korea’s Kospi Index lost 1.4 percent, the biggest one-day drop since Dec. 19.

Catcher Technology Co. and Foxconn Technology Co., which make casings for Apple Inc.’s iPhones, slumped more than 6 percent in Taipei after Apple shares lost 2.3 percent yesterday.

Sri Lanka’s Colombo All-Share Index jumped 5.1 percent, the most since May 2009. The index has slumped 13 percent in 2012, the most among 93 major gauges tracked by Bloomberg, as the central bank raised interest rates while the government scrapped a dollar trading band for the rupee to help preserve its foreign-exchange reserves.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell five basis points, or 0.05 percentage points, to 378 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

--With assistance from Jason Webb in London. Editors: Linda Shen, Emma O’Brien

To contact the reporters on this story: Zachary Tracer in New York at; Weiyi Lim in Singapore at

To contact the editors responsible for this story: Gavin Serkin at; Emma O’Brien at

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