Bloomberg News

Emerging-Market Stocks Decline as Chinese Data Signals Economic Slowdown

March 12, 2012

Emerging-market stocks posted their biggest decline in almost a week as Chinese trade and retail sales data signaled a deepening slowdown in the global economy.

The MSCI Emerging Markets Index (MXEF) declined for the first time in three days, losing 0.9 percent to 1,050.50 at the close in New York. Cia. Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer, led declines on Brazil’s Bovespa (IBOV) index among companies that depend on consumer demand. LG Chem Ltd. (051910), the chemical maker that counts China as its biggest export market, retreated 3.5 percent in Seoul.

China had the largest trade deficit in at least 22 years last month, the weakest gain in factory production between January and February since 2009, and year-to-date retail sales missed analysts’ estimates, government data released March 9 and 10 showed. European finance ministers are moving toward signing off on the 130 billion-euro ($170 billion) aid package for Greece.

“Global demand is abating and China is one of the major export countries, so of course it’s very much affected by this weakening general global demand,” Daniel Lenz, chief emerging market strategist at DZ Bank AG, said by phone from Frankfurt. “China is still growing strongly in comparison to other countries, and there is of course more risk to the downside on exports than on imports.”

The Hang Seng China Enterprises Index (HSCEI) of Chinese mainland stocks traded in Hong Kong slid 0.3 percent, trimming its advance this year to 13 percent. The gauge is trailing the MSCI Emerging Markets Index, which has advanced 15 percent. Developed (MXWO) stocks have rallied 9.1 percent.

ETF Slides

The iShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF that tracks developing-nation shares, slipped 1.1 percent to $43.31, its largest one-day drop since March 6.

Brazil’s Bovespa declined for a second day, losing 0.5 percent. Pao de Acucar dropped 2.7 percent while mining company Vale SA (VALE5), whose top export market is China, fell 1.2 percent for a sixth day of declines, the longest losing streak in seven months. The Standard & Poor’s GSCI Index of 24 raw materials dropped 0.4 percent, slipping for the first time in four days.

The ISE National 100 Index (XU100) fell 0.5 percent in Istanbul and the lira depreciated 0.4 percent versus the dollar to the lowest level in almost seven weeks.

Turkey’s current-account gap was unchanged from a year earlier at $6 billion in January, exceeding the median estimate of $5.5 billion in a Bloomberg survey of six economists.

Sensex Gains

The zloty weakened 0.6 percent against the euro after Narodowy Bank Polski increased its 2012 inflation forecast to 4.1 percent from 3.1 percent, at the same time as it cut the nation’s economic-growth estimate for this year to 3 percent from 3.1 percent.

The BSE India Sensitive Index (SENSEX) added 0.5 percent as the Reserve Bank of India reduced the amount banks must keep in reserve to 4.75 percent from 5.5 percent on March 9, the lowest level since 2004 and the first such action outside a central bank policy meeting since July 2010.

The Shanghai Composite Index (SHCOMP) slid 0.2 percent and Taiwan’s Taiex Index (TWSE) fell 1.1 percent, the most in Asia.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 339 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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