Bloomberg News

Emerging Stocks Extend Monthly Rout on China, India Data

June 01, 2012

Emerging-market stocks fell, sending the benchmark index to the lowest level since December, after data showed manufacturing growth in China and India decelerated and U.S. employers added the fewest workers in a year.

The MSCI Emerging Markets Index (MXEF) slid 1.4 percent to 893.86 at the close in New York this week. The gauge dropped 12 percent last month, its worst May performance since a 14 percent slide in 1998. LLX Logistica SA led declines in Sao Paulo after falling to the lowest since 2009. Brazil’s Bovespa retreated to a seven-month low. Russia’s Micex Index fell for a third day, the longest losing streak in two weeks, as Federal Grid Co. tumbled.

China’s Purchasing Managers’ Index, a measure of manufacturing, expanded at a slower pace for the first time in six months. An Indian purchasing managers’ index was at 54.8 in May from 54.9 in April, HSBC Holdings Plc and Markit Economics said in an e-mailed statement today. U.S. payrolls climbed by 69,000 last month, compared with estimates between 75,000 and 195,000 by 87 economists surveyed by Bloomberg.

“The poor China PMI already produced a bad shock,” Benoit Anne, head of emerging markets strategy at Societe Generale, said in an e-mailed note today. “This morning’s market action is already suggesting global emerging markets investors are increasingly turning panicky.”

The China purchasing gauge slipped to 50.4 in May from 53.3 in April, China’s statistics bureau and logistics federation said today. It’s the weakest reading since December and compares with the 52 median forecast in a Bloomberg News survey of 27 economists. A reading above 50 indicates expansion.

2012 Declines

The MSCI emerging-markets gauge has declined 2.5 percent in 2012, matching the drop for the MSCI World Index of developed nations.

The Standard & Poor’s GSCI Index of 24 raw materials slumped 2.6 percent, extending its retreat for a fourth day. OGX, a Brazilian oil producer, fell 5.9 percent to the lowest level since Aug. 8. The shares declined 13 percent this week.

Brazil’s MRV Engenharia e Participacoes SA fell 4 percent, boosting its weekly retreat to 13 percent. LLX Logistica, a transportation company, fell 8.1 percent to the lowest level since June 2009.

Russia’s Micex dropped 0.6 percent as OAO Sberbank, the country’s largest lender, fell 7.2 percent to the lowest since Oct. 13 in Moscow. Federal Grid declined 7.3 percent, extending its weekly retreat to 16 percent, the most since August 2011.

Market Moves

The WIG20 Index (WIG20) slid 1.2 percent in Warsaw after Bank Pekao SA (PEO), Poland’s second-biggest lender, fell 2.1 percent. The ISE National 100 Index (XU100) added 0.9 percent in Istanbul. BIM Birlesik Magazalar AS (BIMAS), a discount grocer, fell 4.6 percent, for its biggest loss in a year after Goldman Sachs cut the shares to sell. The BUX Index (BUX) rose 1.8 percent in Hungary, paring its weekly decline to 0.2 percent.

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong retreated 0.7 percent.

Aluminum Corp. of China retreated 4.8 percent in Hong Kong, the most since May 9. Five Chinese producers of aluminum including Aluminum Corp. of China said that they will cut output of the material by 10 percent from this month and urged others to follow suit.

The BSE India Sensitive Index (SENSEX) lost 1.6 percent.

The Taiex Index (TWSE) tumbled 2.7 percent in Taipei, the most since May 18. Taiwan Semiconductor Manufacturing Co. (2330), the world’s largest custom maker of chips, slid 6.1 percent, the most since January 2009, after Goldman Sachs Group Inc. and Jefferies Group Inc. downgraded the stock.

Outflows

The FTSE/JSE Africa All Share Index (JALSH) fell 0.1 percent in Johannesburg. Telkom South Africa Ltd. (TKG) slid 8.3 percent to the lowest since 2003 after saying South Africa’s government won’t support a plan to sell a stake in the continent’s biggest fixed- line phone company to South Korea’s KT Corp. (030200)

Emerging-market equity funds posted outflows of $1.1 billion in the week ended May 30, Markus Rosgen, a Hong Kong- based analyst at Citigroup Inc., wrote in a report today, citing data compiled by EPFR Global. Investors continue to prefer developed-nation stocks compared with emerging-market shares, according to the report.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 11 basis points, or 0.11 percentage point, to 440, 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; Jason Webb in London at jwebb25@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net; Tal Barak Harif at tbarak@bloomberg.net


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