Emerging-market stocks fell for the first time in three days as Goldman Sachs Group Inc. cut Chinese earnings estimates and a report showed contraction in U.S. manufacturing for a third straight month.
The MSCI Emerging Markets Index (MXEF) slipped 0.6 percent to 947.37. Brazil’s Bovespa stock index retreated to a one-month low, with homebuilder Rossi Residencial SA (RSID3) and JBS SA (JBSS3), the world’s largest beef producer, leading the decliners. China Merchants Bank Co. (3968) dropped for a fifth day in Hong Kong, while the Shanghai Composite Index closed at its lowest level since February 2009. Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) retreated more than 2 percent in Seoul.
Goldman Sachs cut its projections for Chinese earnings this year and next while Credit Suisse Group AG reduced its target for the MSCI China Index and Societe Generale (GLE) SA lowered forecasts for the nation’s economic growth. The Institute for Supply Management’s factory index fell to 49.6 last month, the longest slide since the recession ended.
“You have weaker growth in the U.S., China’s slowdown and the euro zone debt crisis all adding to a reduced appetite for risk,” Win Thin, global head of emerging-market strategy at Brown Brothers Harriman & Co., said by phone from New York. “I still believe in emerging markets in the long-term, but in the shorter term, I am a little bit more nervous and defensive.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares, decreased 0.5 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, jumped 5.6 percent.
The Bovespa lost 1.8 percent to the lowest since Aug. 2 with Rossi falling 9.6 percent. JBS declined 7.1 percent.
Economists in a Bloomberg survey projected an August reading of 50 for factory activity in the U.S., which is the dividing line between expansion and contraction. Measures of orders, production and employment were the weakest since 2009.
The MSCI emerging market gauge has climbed 3.4 percent this year, trailing a 7.8 percent increase by the MSCI World Index (VXEEM) of advanced-nation equities. Shares in the emerging-markets gauge trade at 10.7 times estimated earnings, compared with the MSCI World’s multiple of 12.9, data compiled by Bloomberg show.
The Shanghai Composite lost 0.8 percent today, matching the drop in MSCI’s China gauge of mainland companies accessible to foreign investors. South Korea’s Kospi Index (KOSPI) slipped 0.3 percent. The BSE India Sensitive Index advanced 0.3 percent.
The extra yield investors demand to own emerging-market bonds over U.S. Treasuries dropped 5 basis points, or 0.05 percentage point, to 320, according to JPMorgan Chase & Co.’s EMBI Global Index.
Profits for companies in the MSCI China Index may increase 1.8 percent this year and 8.6 percent in 2013, compared with previous growth estimates of 6 percent and 12.3 percent, Helen Zhu and Timothy Moe, analysts at New York-based Goldman Sachs, wrote in a report dated yesterday.
Credit Suisse lowered its 12-month target for the index to 60 from 70, analysts Vincent Chan and Peggy Chan said in a report. The gauge traded at 52.42 today. Societe Generale cut its 2012 economic growth forecast to 7.7 percent from 8.1 percent.
China Merchants Bank sank 3 percent in Hong Kong, while Industrial & Commercial Bank of China Ltd., the nation’s biggest lender by market value, dropped 1 percent.
Hyundai Motor, South Korea’s largest carmaker, fell 2.3 percent, the most in a month, after its August car sales slid 4.6 percent from a year earlier. Kia declined 2.5 percent. The company shipped 0.5 percent fewer vehicles during the period, according to a regulatory filing yesterday.
Macronix International (2337) Co. rose the most on the MSCI index and closed at the highest level since July 9 in Taipei. The company has received NOR flash memory orders for the next iPhone, Digitimes reported, citing people familiar with the supply chain.
AU Optronics Corp. (2409) jumped 3.9 percent, the most since Aug. 22, after the Economic Daily News reported the company will boost its supply of television panels to Sony Corp.
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