Emerging-market stocks fell, erasing the benchmark index’s weekly gains, as U.S. data pointed to a slowdown in the world’s largest economy, fueling concern exports from developing nations will drop.
The MSCI Emerging Markets Index (MXEF) lost 1.6 percent to 917.18 as of 5:15 p.m. in New York, pushing the weekly drop to 0.9 percent. Brookfield Incorporacoes SA, a Brazilian real-estate company, led declines on the Bovespa benchmark gauge. Russia’s Micex Index retreated for a third day as Brent declined for a second week. India’s rupee plunged to the lowest level on record.
A Federal Reserve Bank of Philadelphia index signaled the worst contraction in manufacturing in almost a year, while existing U.S. home sales fell more than forecast and jobless claims exceeded estimates. Moody’s Investors Service cut credit ratings for Credit Suisse Group AG and 14 other banks. U.S. policy makers cut this week their expectations for growth in 2012 to a range of 1.9 percent to 2.4 percent, down from an April prediction of 2.4 percent to 2.9 percent.
“A U.S slowdown hits emerging markets much harder,” Kit Juckes, head of currency research at Societe Generale SA in London, said in an e-mail. “The U.S. is the engine of global growth and therefore of commodities, raw materials and emerging- market assets. A lot of money may be taken off the table in emerging markets in a hurry.”
The IShares MSCI Emerging Markets Index (VXEEM) exchange-traded fund, the most-traded ETF tracking developing-nation shares, gained 0.3 percent to $37.79.
The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, fell 4.5 percent to 27.47.
The Bovespa dropped 0.1 percent as Brookfield declined 3.7 percent and Centrais Eletricas Brasileiras SA, the electricity company known as Eletrobras, retreated 3 percent.
The Micex sank 1.2 percent in Moscow as OAO Sberbank, Russia’s largest lender, fell 1.7 percent, and OAO Mechel (MTL:US), the country’s largest coal producer for steelmakers, lost 6.8 percent.
The BSE India Sensitive Index (SENSEX) slipped 0.4 percent, the first decline in four days, as Reliance Industries Ltd. (RIL), operator of the world’s largest refining complex, fell to a two- week low. Hindalco Industries Ltd., the aluminum maker that controls U.S.-based Novelis Inc., dropped the most in a month.
The rupee depreciated 1.5 percent to 57.1550 per dollar in Mumbai, plunging the most in nine months on concern slower economic growth will reduce capital inflows.
Fitch Ratings cut India’s sovereign credit-rating outlook to negative on June 19, joining Standard & Poor’s in signaling the country is at risk of losing its investment-grade status.
South African Shares
The FTSE/JSE Africa All Share Index slipped 1.2 percent in as metal prices retreated. Anglo American Plc (AGL), the diversified miner that makes up almost 8 percent of the index, slid 2.2 percent, a second day of losses. Aquarius Platinum Ltd. (AQP), which has suspended operations at two mines in the past two weeks, slumped to a seven-year low.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong fell 1.7 percent. South Korea’s Kospi Index (KOSPI) led declines among Asian benchmark indexes as Samsung Electronics Co. (005930) lost 3.7 percent to the lowest level since May 18. Weaker-than-expected handset shipments and lower margin will likely cause the company to miss earnings consensus, according to a JPMorgan Chase & Co. report.
Emerging-market stock funds posted redemptions of $216 million for the week ending June 20, according to Cambridge, Massachusetts-based EPFR Global. Asia funds excluding Japan posted a $1.03 billion outflow during the week, the largest among emerging markets and the biggest for the region this year, EPFR said.
The retreat that erased $3.6 trillion from global stocks this quarter has left more than 580 companies in MSCI Inc. indexes valued at less than their net assets, prompting some investors including Harris Associates LP’s David Herro to buy shares.
“I’ve been significantly adding,” said Herro, whose $7.9 billion Oakmark International Fund beat 81 percent of peers in the past three years. “Even though it feels gloomy, this type of environment makes my job quite easy.”
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell six basis points, or 0.06 percentage point, to 380, according to JPMorgan’s EMBI Global Index.
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