Bloomberg News

Emerging Stocks Post Longest Weekly Losing Streak Since 1994

May 25, 2012

Most emerging stocks fell, posting their longest weekly losing streak since 1994, as utilities and telephone companies slid and concern China’s biggest banks may miss lending plans offset gains for commodity producers.

The MSCI Emerging Markets Index (MXEF) declined 0.5 percent to 902.13 this week, extending the rout to the longest in 18 years. Utility companies tumbled for an eighth week as Federal Grid Co. fell for a 12th week. Telephone companies retreated to the lowest level in 2012, led by declines in Indonesian communication providers. Russia’s Micex Index added 0.8 percent in five days while Brazil’s Bovespa slipped 0.1 percent.

China’s biggest banks may fall short of loan targets for the first time in at least seven years as an economic slowdown crimps demand for credit, three bank officials with knowledge of the matter said today. Copper and crude oil gained today after Prime Minister Mario Monti told Italian television station La7 yesterday the majority of European Union leaders at a Brussels meeting this week backed joint euro-area bonds.

“European leaders are trying to instill order into chaos, they’re doing everything to prevent another crisis from happening,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “There has to be a clearer picture on China’s slowdown and some resolution must be reached in Europe to reverse this sentiment.”

Outflows Slowing

Emerging-market equity fund outflows slowed this week, Citigroup Inc. said. Developing nations had $1.5 billion of outflows in the week ended May 23, according to Citigroup and Morgan Stanley reports today, citing data from fund researcher EPFR Global.

There were net sales of $2.3 billion the previous week, Citigroup reported on May 18. Funds in Asia excluding Japan had the biggest redemptions of the year with outflows of $768 million in the most recent week, Citigroup said today.

The MSCI gauge of 21 developing nations, down 1.6 percent this year, trades at 9.7 times estimated earnings, compared with 11.7 for the MSCI World Index (MXWO) of advanced nations, which has added 0.5 percent in 2012.

Brazil’s Bovespa retreated 0.1 percent this week as Centrais Electricas Brasileiras SA plunged 17 percent. Clothing retailer B2W Cia Global do Varejo declined 13 percent in Sao Paulo.

Russia’s Micex index added 0.8 percent, snapping a four- week decline. OAO Tatneft, an oil producer, led advances for the index after it rose 8.3 percent, the biggest weekly gain in 2012.

Utility, Phone

Federal Grid, Russia’s monopoly for high-voltage power transmission lines, slipped 16 percent in Moscow to fall for a 12th week, the longest losing streak since 2008.

Federal Grid was among leading decliners for utility companies this week, which have retreated 2.1 percent.

Telephone companies had a weekly slide of 1.6 percent after PT Telekomunikasi Indonesia (TLKM), the nation’s biggest telephone company, plunged 8.2 percent. Indonesia’s Jakarta Composite Index (JCI) sank 2 percent as a weakening rupiah raised concerns investors are reducing holdings of the nation’s assets amid Europe’s debt crisis.

The rupiah fell 1.1 percent against the dollar to the weakest level since December 2009.

PT Bank Danamon Indonesia (BDMN) slumped 8.8 percent amid concern Bank Indonesia’s plan to tighten a bank-ownership regulation will prevent DBS Group Holdings Ltd. from buying Danamon shares through a tender offer, according to Arief Fahruri, an analyst at PT Mega Capital Indonesia in Jakarta.

Commodity Producers

The FTSE/JSE Africa All Shares Index (JALSH) sank 0.5 percent in Johannesburg, while the BUX Index (BUX) declined 0.4 percent in Budapest. The WIG20 Index (WIG20) fell 1.2 percent in Warsaw. The Shanghai Composite Index fell 0.5 percent.

Cnooc Ltd. (883), China’s largest offshore crude producer, rose 0.7 percent in Hong Kong. KGHM Polska Miedz (KGH), the copper miner with the biggest European mine output, fell 1 percent this week.

Crude for July delivery rose 20 cents to settle at $90.86 a barrel in electronic trading on the New York Mercantile Exchange today.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 407 today, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Christine Harvey in New York at charvey32@bloomberg.net; Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net; Tal Barak Harif at tbarak@bloomberg.net


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