Bloomberg News

Emerging-Market Stocks Decline on China, India Growth Concern

March 15, 2012

Emerging-market stocks retreated, following two days of gains in the benchmark index, as concern that growth in China and India is slowing dimmed the outlook for the global economy.

About three shares declined for every two that advanced in the MSCI Emerging Markets Index (MXEF), which fell 0.1 percent to 1,065.45 at the close in New York. Beef producer Marfrig Alimentos SA (MRFG3) posted its biggest drop this year in Sao Paulo as the Bovespa slumped. A gauge of Chinese property companies lost 2.5 percent, tipping the Shanghai Composite Index to its biggest two-day retreat in since August. The BSE India Sensitive Index (SENSEX) slid 1.4 percent. Turkish banks contributed the most to the ISE National 100 Index (XU100)’s 0.7 percent increase.

Foreign direct investment in China fell 0.9 percent in February, its fourth straight decline, as companies reined in spending amid a slowdown in the world’s second-biggest economy and the prolonged European debt crisis. The Reserve Bank of India kept the repurchase rate at 8.5 percent for a third consecutive meeting today. Economic growth may slow to 6.9 percent this year as inflation stays “high,” Finance Minister Pranab Mukherjee said.

“There’s been some disappointment over the last few days over the pace of Chinese easing,” John Lomax, an emerging- markets strategist at HSBC Holdings Plc., said by phone from London. “India is the BRIC market where we’re a bit less enthusiastic because we think easing will be a bit delayed.”

Emerging markets stocks are up 16 percent this year, ahead of the 11 percent advance for developed-market shares. Stocks on the MSCI World Index of developed countries trade for 13.2 times earnings, above the 10.9 ratio for developing nations.

Marfrig, Cyrela

The number of Americans applying for jobless benefits fell to 351,000 last week, matching a four-year low, U.S. Labor Department data showed today. Manufacturing in the New York region expanded in March at the fastest pace since June 2010, according to a report from the Federal Reserve Bank of New York.

Marfrig lost 3.4 percent, its largest fall since Dec. 28. The Bovespa (IBOV) stock index retreated 0.7 percent. Homebuilder Cyrela Brazil Realty SA Empreendimentos e Participacoes lost 3.1 percent.

The Shanghai Composite Index fell 0.7 percent, taking its two-day decline to 3.3 percent, the most since Aug. 9.

China Vanke Co. (200002), the nation’s biggest listed property developer, fell 3.4 percent in Shanghai, and Poly Real Estate Group Co. (600048), the second-largest, slid 2.6 percent. Premier Wen Jiabao said yesterday home prices are still far from reasonable levels, dimming hopes real-estate curbs will be eased.

‘Hard Landing’

China’s economy is already in a “hard landing,” Adrian Mowat, JPMorgan Chase & Co.’s chief Asian and emerging-market strategist, said at a conference in Singapore yesterday. “It’s not a debate anymore, it’s a fact.”

State Bank of India Ltd. lost 2.4 percent as the central bank held rates steady.

Data yesterday showed India’s inflation accelerated for the first time in five months in February, weakening the case for lower borrowing costs. The wholesale-price index rose 6.95 percent in February, after rising 6.55 percent in January.

India’s rupee depreciated 1 percent against the dollar, the most among 25 emerging-market currencies tracked by Bloomberg.

Akbank TAS (AKBNK), the Turkish bank part-owned by Citigroup Inc., gained 2.3 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage points, to 321 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 editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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