Emerging-market stocks fell by the most in a week after Xinhua News Agency reported China won’t ease restrictions on its property market and as concern deepened that Europe’s debt crisis will sap global growth.
The MSCI Emerging Markets Index (MXEF) slid 0.5 percent to 936.87 in New York. Vale SA, the world’s largest iron-ore producer, contributed to the decrease in Brazil’s Bovespa index, which fell from a two-week high. Oil producer OAO Tatneft pushed Russia’s Micex Index lower. The Shanghai Composite Index slid 0.7 percent, capping its fifth week of declines.
China won’t relax property control policies and will instead seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices, Xinhua said. Spain said its recession will extend into next year as it cut its growth forecast, indicating a worsening European debt crisis situation. The yield premium for Spanish benchmark bonds over German bunds surged to a record.
“The property market is an important part of the Chinese economy and such moves would negatively affect growth,” Echo He, an analyst at Maxim Group in New York, said by phone. “If Chinese demand is lower, then a lot of commodity-driven emerging markets will be affected.”
MSCI’s index of developing nations, which has gained 2.2 percent this year, trades at a multiple of 10.2 times estimated earnings, compared with 12.4 for the MSCI World Index of developed nations, which has advanced 4.1 percent in 2012, according to data compiled by Bloomberg.
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, fell 1.5 percent to $38.59. The Chicago Board Options Exchange Emerging Markets ETF (EEM:US) Volatility Index, a measure of options prices on the fund and expectations of price swings, jumped for the first time in four days by 3.1 percent to 24.65.
The Bovespa Index declined 2.1 percent to 54,194.79, as Vale dropped 1.8 percent. The Micex gauge fell 1.3 percent. OAO Tatneft, the oil producer based in the Tatarstan region, dropped 2.6 percent.
The difference in yield between Spain’s 10-year bonds and Germany’s widened to a record 610 basis points, or 6.1 percentage points, as European foreign ministers gave approval to a Spanish bank bailout. The Spanish region of Valencia will tap the government’s regional financing facility, it said on its website.
Investors withdrew $796 million from emerging market equity funds in the week through July 18, according to EPFR Global data cited by Troika Dialog.
Chinese property stocks slid 1.1 percent in Shanghai, the most among the five industry groups in the Shanghai Composite Index. China Vanke Co. (000002), the largest developer, slipped 1.5 percent, while Poly Real Estate (600048) lost 1.8 percent.
A gauge of emerging-market energy companies slipped 1 percent, the biggest contribution to the fall of the overall MSCI Emerging Markets Index.
The Hang Seng China Enterprise (HSCEI) Index of mainland companies listed in Hong Kong rose 0.6 percent.
China Telecom Corp. gained 3.6 percent and China Unicom (Hong Kong) Ltd. (726) jumped 7.2 percent as a report showed mobile phones overtook desktop computers as the most popular Internet portals in China.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries added five basis points to 350, according to JPMorgan Chase & Co.’s EMBI Global Index.
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