Bloomberg News

Emerging Stocks Fall From 6-Month High as Airlines, Automakers Drop on Oil

February 27, 2012

Emerging-market stocks fell from a six-month high on concern higher energy costs will hurt economic growth and erode earnings at airlines and automakers.

Korean Air Lines Co. (003490), South Korea’s biggest carrier, dropped 5.3 percent even as crude-oil futures fell from a nine- month high. Thai Airways International Pcl sank 3.5 percent after posting its largest annual loss in three years. Hyundai Motor Co. (005380), South Korea’s No. 1 automaker, dropped to a two-month low and India’s Tata Motors Ltd. (TTMT) slid 2.4 percent.

The MSCI Emerging Markets Index (MXEF) fell 0.7 percent to 1,060.39 as of 2:51 p.m. in Singapore, after reaching a six- month high on Feb. 24. The Philippine Stock Exchange Index slid 2 percent and South Korea’s Kospi Index and the BSE India Sensitive Index each lost at least 1.4 percent. China’s Shanghai Composite Index (SHCOMP) rose to a three month high, on expectations the government will further loosen monetary policies to spur growth.

“High oil prices for a certain period will derail the global economic recovery, which remain very fragile,” Jintana Mekintharanggur, who helps overseas about $164 million as the director of equities investment at Manulife Asset Management Co. in Bangkok, said by phone today. “Higher energy costs will also accelerate inflation, hindering the policy makers’ ability to cut interest rate further to boost growth.”

Higher oil prices may push inflation in South Korea, the world’s fifth-largest oil importer, above the government’s target and have a “far-reaching” effect on the economy, Finance Minister Bahk Jae Wan said in an interview in Mexico City over the weekend. The world economy is “not out of the danger zone” amid fragile financial systems, high public and private debt and rising oil prices, International Monetary Fund Managing Director Christine Lagarde said in a statement after the Group of 20 meeting this weekend.

Oil Prices

Crude oil for April delivery slid as much as 0.5 percent today. Oil gained 1.8 percent to $109.77 a barrel in New York on Feb. 24, advancing for a seventh day, the longest stretch since January 2010.

MSCI’s emerging-market gauge has gained 16 percent this year, beating the 9.9 percent gain for the MSCI World Index of developed-market shares. The developing-nation index trades at 10.6 times estimated earnings, below the 12.9 multiple for the MSCI World.

Gauges of consumer-related companies and industrial stocks dropped 1.2 percent each, the most among the 10 industry groups in MSCI’s emerging-markets index. Tata fell 2.4 percent, the most since Feb. 16. Hyundai Motor lost 3 percent, set for the lowest close since Dec. 20.

Aboitiz Tumbles

Aboitiz Equity Ventures Inc. (AEV), which has investments in power, food and banking, was the biggest contributor to the drop in the emerging-markets index of industrial companies. Aboitiz Equity tumbled 12 percent in Manila trading, the most in almost 11 years, after the company denied it’s in talks to merge its Union Bank of the Philippines venture with either Bank of the Philippine Islands or Rizal Commercial Banking Corp.

Thai Airways, the nation’s largest carrier, dropped 3.5 percent in Bangkok trading. The company reported a loss of 10.2 billion baht in 2011, compared with net income of 14.7 billion baht in 2010, after costs related to foreign-currency debt and fuel surged, it said in a filing.

Korean Air, South Korea’s largest carrier, slumped 5.3 percent in Seoul trading. China Airlines Ltd. (2601), Taiwan’s largest carrier, slipped 1.1 percent and Eva Airways Corp. (2618) declined 2 percent in Taipei.

China, Vietnam Gain

China’s Shanghai Composite Index climbed 1.1 percent, heading for the highest close since Nov. 16. China Vanke Co. (000002) gained among developers after a newspaper reported suggestions from a former central bank official to help boost lending. Vanke, the nation’s biggest listed property developer, rose 1.5 percent. Gemdale Corp. (6000383) gained 2.7 percent.

Vietnam’s benchmark VN Index rose 1.2 percent to 428.41 at the close, the highest level since Sep. 28 on speculation slowing inflation will prompt central bank to cut interest rates.

Consumer prices climbed 16.44 percent in February from a year earlier, the General Statistics Office said Feb. 24. That compared with a 17.27 percent pace reported earlier for last month. Prices rose 1.37 percent this month from January.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net.

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


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