Bloomberg News

Most Emerging Stocks Fall Commodities Drop on Growth View

October 12, 2012

Most emerging-market stocks fell, with the benchmark index (VXEEM) posting its biggest weekly decline since August, as commodities tumbled on renewed concern that global growth is slowing.

The MSCI Emerging Markets Index fell 1.2 percent this week after closing little changed at 996.70 in New York. (INFY:US) Three hundred thirty-nine stocks fell on the gauge today while 337 rose. OAO Gazprom, the world’s biggest natural-gas producer, fell to a two-month low in Moscow. Infosys Ltd. (INFO) sank in Mumbai and New York after cutting its sales forecast. China Construction Bank Corp. (939) rose to a five-month high as the nation’s lenders were said to be resisting government pressure to cut borrowing costs.

The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 1 percent and stocks in developed markets declined as International Monetary Fund Managing Director Christine Lagarde said global growth is not fast enough to curb unemployment, raising concerns about the recovery.

“Part of it is the general negative tone in Europe,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview “And as we begin to look down the pike to the range of news, a lot of it is not very encouraging.”

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares,declined 0.3 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 0.1 percent.

South Africa Rating

Standard & Poor’s cut South Africa’s sovereign rating by one level, citing concern that a wave of strikes in the mining industry is causing political and social unrest and putting pressure on government spending. The rand dropped 0.8 percent against the dollar, the most among 25 emerging market currencies.

Fitch Ratings Ltd. said in statement distributed by Business Wire that Brazil’s slowdown is slower and deeper than anticipated, and is boosting the effect of the global crisis in countries like Argentina and Uruguay. Brazilian markets were closed today for a holiday.

Infosys, India’s second-largest software services exporter, tumbled 5.4 percent in Mumbai, the most in three months, after cutting its revenue growth forecast. The BSE India Sensitive Index fell 0.7 percent. Infosys’s American depositary receipts (INFY:US) tumbled 7.6 percent to $44.54, the biggest one-day decline since July 12.

Gazprom Drops

Russia’s Micex Index dropped 1.2 percent. Gazprom slumped 1.3 percent. OAO Raspadskaya, a producer of coal for steelmaking, declined 2.4 percent. OAO Inter RAO fell 3.9 percent, the most in three months. Kumba Iron Ore slipped 0.5 percent as South Africa’s FTSE/JSE Africa All Share Index (JALSH) retreated 0.2 percent.

Copper, tin, nickel and zinc fell. Crude declined after the International Energy Agency reduced its forecast for global demand, saying slower economic growth may limit fuel consumption.

The WIG 20 Index in Poland declined for the first time in three days, slipping 0.8 percent. PKO Bank Polski SA, the country’s largest bank, sank 2.2 percent after Prime Minister Donald Tusk unveiled plans to transfer shares in state-owned companies to an investment vehicle that may sell government holdings.

The benchmark index for emerging stocks earlier gained as much as 0.4 percent, as a sentiment index showed confidence among U.S. consumers unexpectedly rose this month to the highest level since before the recession began five years ago.

U.S. Consumer Sentiment

The Thomson Reuters/University of Michigan preliminary October U.S. consumer sentiment index increased to 83.1, the highest level since September 2007, from 78.3 the prior month, data today shows. The gauge was projected to fall to 78, according to the median forecast of 71 economists surveyed by Bloomberg.

Consumer stocks were among the biggest gainers as a group in the MSCI Emerging Markets index (MXEF) as China Agri-Industries Holdings Ltd. surged 7.9 percent in Hong Kong after UBS AG upgraded the biofuel producer.

Emerging-market equities posted a fifth week of inflows, while investors sold developed-nation stocks, Citigroup Inc. said. Emerging funds attracted $828 million in the week ended Oct. 10, compared with a $2.1 billion outflow from developed funds, according to Citigroup.

China Construction Bank rallied 1.8 percent, while ICBC and Agricultural Bank of China Ltd. (601288) both advanced more than 1.2 percent.

China’s biggest banks are resisting government pressure to lower borrowing costs amid an economic slowdown as they seek to maintain the profitability of their lending operations, bank officials said, asking not to be identified as they’re not authorized to speak publicly.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage point, to 291, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net; Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editors responsible for this story: Allen Wan at awan3@bloomberg.net; Vernon Wessels at vwessels@bloomberg.net


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Companies Mentioned

  • INFY
    (Infosys Ltd)
    • $52.88 USD
    • 0.30
    • 0.57%
  • EEM
    (iShares MSCI Emerging Markets ETF)
    • $42.01 USD
    • 0.38
    • 0.9%
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