Emerging-market stocks fell, paring the first weekly gain since March, on concerns China’s interest- rate cut will erode bank profits and as economic data from Germany and Italy disappointed.
The MSCI Emerging Markets Index slid 0.9 percent to 905.17 at the close in New York, decreasing its weekly advance to 1.3 percent. HTC Corp. (2498), Asia’s second biggest smartphone maker, tumbled 6.9 percent, extending its weekly retreat to 15 percent in Taipei. China Construction Bank Corp. (939) slid 4 percent, the most since Nov. 10. Brazil’s Bovespa added 1.9 percent, snapping its longest weekly losing streak since 2004.
China’s cut in funding costs comes a day before the nation is due to report inflation, investment and output figures. Spain’s credit ranking was cut three levels by Fitch Ratings to BBB, within two steps of non-investment grade. German exports dropped in April for the first time this year and industrial output in Italy fell more than economists estimated, reports showed today.
“Speculation that bank competition in China may accelerate and that the nation’s economic data may be worse than expected are hurting sentiment today,” said Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees $28 billion.
The MSCI Emerging Markets Index (MXEF) trades at 9.8 times estimated earnings, cheaper than the 11.8 multiple for shares on the MSCI World Index, which rallied 3.1 percent in the past five days. That’s the biggest weekly advance in 2012.
The trade deficit in the U.S. shrank 4.9 percent to $50.1 billion from $52.6 billion in March as a drop in imports overshadowed the first decline in exports in five months, Commerce Department figures showed today. The median forecast in a Bloomberg News survey of 73 economists called for the deficit to shrink to $49.5 billion.
The Bovespa added 0.5 percent in Brazil, extending its five-day advance to 1.9 percent. Gafisa SA, a Brazilian homebuilder, surged 16 percent today after saying earlier this week it will buy the remaining stake in Alphaville Urbanismo SA that it doesn’t already own.
Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- largest steelmaker, dropped 8 percent in Sao Paulo this week to lead declines on the index.
Russia’s Micex Index (INDEXCF) fell 0.3 percent in Moscow, paring its weekly advance to 2.7 percent. OAO Raspadskaya, the coal producer based in Russia’s Kemerovo region, slid 4.4 percent, lessening its five-day advance to 4.4 percent.
The financial and economic links between central and eastern European countries and the EU mean “they are all vulnerable to the euro-area stress,” Societe Generale SA wrote in a report to clients dated yesterday.
China’s biggest lenders raised deposit rates hours after the country’s central bank lowered its benchmark and gave them more freedom over pricing, underscoring the competition for funds. Bank profits may drop by more than 10 percent after the interest-rate reduction, according to Hao Hong, chief China strategist at BoCom.
Industrial & Commercial Bank of China declined 4.9 percent in Hong Kong, while China Construction Bank Corp. retreated 4 percent. The losses were the most since Nov. 10.
The Hang Seng China Enterprises Index lost 1.3 percent to an almost eight-month low and Taiwan’s Taiex Index (TWSE) fell 1.1 percent. HTC Corp. sank after Bank of America cut the smartphone maker’s rating.
South Korea’s Kospi index dropped 0.7 percent, while South Africa’s FTSE/JSE Africa All-Share Index slumped 0.7 percent as BHP Billiton Plc, the world’s biggest resources company, decreased 2.7 percent in Johannesburg. Turkey’s ISE National 100 Index slid 1.1 percent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 1 basis points, or 0.01 percentage point, to 396, according to JPMorgan Chase & Co.’s EMBI Global Index.
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