Bloomberg News

Emerging Stocks Fall Most in Three Weeks on Slower China Growth

March 05, 2012

Emerging-market stocks declined the most in three weeks after China set the lowest economic growth target since 2004 and euro-area manufacturing and services shrank.

The MSCI Emerging Markets Index (MXEF) fell 1.4 percent to 1,065.30 at the close in New York, slipping from a seven-month high. PetroChina Co. (601857) slid 1.1 percent after saying losses from processing crude last year were larger than expected. Vale SA (VALE5), the Brazilian iron-ore producer whose top export market is China, dropped the most in three months. OAO Gazprom (GAZP), the world’s biggest natural gas producer, gained 2 percent after Vladimir Putin won Russia’s presidential election and the benchmark Micex Index (INDEXCF) advanced to a seven-month high. Indian stocks hit a one-month low.

The Chinese government will aim for economic growth of 7.5 percent this year, the lowest goal since 2004, according to a transcript of Premier Wen Jiabao’s address to the National People’s Congress in Beijing today. European services and manufacturing output shrank in February more than previously estimated, Markit Economics said.

“China has become a very important trading partner, of course, throughout Asia but also for Latin American countries,” Daniel Lenz, chief emerging market strategist at DZ Bank AG, said by phone from Frankfurt. The growth target is “at the lower end of market expectations.”

Emerging-market stocks pared this year’s advance in the index to 16 percent, beating the 9.3 percent jump in developed- market equities. Developing-nation stocks trade for 10.7 times estimated earnings, cheaper than the 12.9 multiple of stocks in the MSCI World Index (MXWO) of developed-market shares.

Euro-Zone Output

Vietnam’s VN Index (VNINDEX) jumped 4 percent, the most in Asia, after the prime minister signed a directive aimed at developing the nation’s equity markets.

Euro-area services and manufacturing output shrank in February as the region’s economy struggled to rebound from a contraction in the fourth quarter of last year. An index based on a survey of purchasing managers in the services industry dropped to 48.8, London-based Markit Economics said on its website today. A reading below 50 indicates contraction.

Greece’s private creditors decide this week whether to approve the biggest sovereign-debt restructuring in history.

Brazil’s Bovespa Index (IBOV) slumped 1.2 percent, the first drop in three days. Vale declined 2.9 percent and competitor MMX Mineracao e Metalicos SA lost 4.1 percent.

Putin Wins

Moscow’s Micex Index (MICEX) gained 1.1 percent to the highest since Aug. 3 after Putin won about 64 percent of the vote, with almost 100 percent of the ballots counted. OAO Novatek (NVTK), the country’s largest independent gas producer, jumped 2.4 percent.

“It’s clear that Putin has broad and deep support and that should be a comfort to markets,” Mattias Westman, managing director of London-based Prosperity Capital Management, which has about $5 billion of Russian assets under management, said from Moscow yesterday. “We’re hoping this election will lead to accelerated reforms and that should be good for state-controlled companies.”

Gazprom (GAZP), Russia’s largest company and gas export monopoly, jumped in Moscow to the highest level in more than seven months.

The ISE National 100 Index (XU100) slid 2 percent in Istanbul and the FTSE/JSE Africa All Share Index (JALSH) retreated 0.5 percent in Johannesburg. The BUX Index (BUX) tumbled 1.6 percent in Hungary and the WIG20 Index (WIG20) fell 1.8 percent in Warsaw.

Asian Stocks Slide

The Shanghai Composite Index (SHCOMP) fell 0.6 percent and the Hang Seng China Enterprises Index (HSCEI) of mainland stocks in Hong Kong lost 2.3 percent.

The BSE India Sensitive Index (SENSEX), or Sensex, fell 1.6 percent in Mumbai before the results of state elections that may be crucial in determining whether Prime Minister Manmohan Singh has enough support for his economic agenda, which includes pouring $1 trillion into revamping choked transport and power networks.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 2 basis points, or 0.02 percentage point, to 346 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

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