Emerging-market stocks fell for a third day as power producers led declines in Brazilian equities and markets in China, South Korea and Poland retreated. Russian shares advanced on their first day of 2013 trading.
Centrais Eletricas Brasileiras SA (ELET6) was the worst performer on the MSCI Emerging Markets Index, and led a 1.3 percent slide in the Bovespa index. Industrial and raw materials stocks led declines on the MSCI gauge, as Embraer SA (EMBR3), the world’s fourth- largest planemaker, slid 4.2 percent in Sao Paulo after JPMorgan Chase & Co. downgraded the stock. HTC Corp. (2498) and Samsung Electronics Co. (005930) fell after their earnings disappointed some investors. Russia’s Micex index rallied 2.7 percent during the day.
The MSCI emerging-markets measure fell 0.5 percent to 1,069.68 in New York after jumping 2.2 percent last week in its steepest surge since November. The iShares MSCI Emerging Markets exchange-traded fund (EEM:US) also dropped, tumbling 0.9 percent to $44.25 for the biggest one-day decline since Dec. 21. Brazil is considering energy rationing amid lower water levels at hydropower dams, the O Estado de S.Paulo newspaper reported, citing a government official it didn’t identify.
“In Brazil the utilities sector is pretty weak, and whenever you have a major name down that much, it’s going to drag on the benchmark,” Alec Young, a global equity strategist at S&P Capital IQ, said by phone in New York. “Whether it’s the Bovespa or the MSCI Emerging Markets Index, it’s been kind of straight line up for the last few weeks so it’s also a natural place for some profit-taking.”
The MSCI Emerging Markets Index has advanced 1.4 percent this month, trailing the 1.8 percent increase in the MSCI World Index (MXWO) of developed-country equities. The emerging-nations gauge trades at 10.9 times estimated profit, compared with the MSCI World’s 13.1 multiple, according to data compiled by Bloomberg.
An index of emerging-markets industrial stocks dropped 0.8 percent, the most since Dec. 21, while the gauge of materials companies lost 0.9 percent. Embraer fell the most since Nov. 29 in Sao Paulo after JPMorgan cut the planemaker to underweight, or the equivalent of sell, from neutral.
Brazil’s Bovespa had its biggest decline in a week as Eletrobras, as Centrais Eletricas Brasileiras is known, tumbled 9.4 percent, the most in seven weeks.
MMX Mineracao e Metalicos SA, the iron-ore producer controlled by billionaire Eike Batista, lost 3.6 percent to the lowest price since Dec. 17 after saying in a regulatory filing it was ordered to pay 3.76 billion reais ($1.85 billion) by Brazilian authorities for overdue taxes. MMX said it will appeal the claim.
The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the ETF and expectations of price swings, rallied for a second day in New York, adding 1.6 percent to 18.23.
Implied volatility (EEM:US) for three-month options closest to the iShares MSCI Emerging Markets Index has fallen 41 percent in the past year and reached a record of 18.18 on Jan. 4, as options dealers charge the lowest prices ever to protect against declines in emerging market equities. The key gauge of options prices reached its lowest level ever relative to the SPDR S&P 500 ETF Trust on Dec. 27, according to data compiled by Bloomberg.
Turkey’s ISE National 100 index slipped 0.1 percent, while benchmark gauges in Hungary and Poland fell at least 0.4 percent. Dubai’s DFM General Index rose 2.1 percent to the highest level since March 5.
Turkcell Iletisim Hizmetleri AS (TCELL) climbed to the highest level in almost five years in Istanbul, rising 1.3 percent, amid speculation that Turkey’s biggest mobile-phone company may pay the first dividend since 2010 this year.
Egypt’s EGX 30 Index climbed 1.2 percent to the highest level since Oct. 29 after the International Monetary Fund said it plans to resume talks on a possible loan seen as crucial to preventing a disorderly currency devaluation.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong sank 2.2 percent, trimming this year’s gain to 2.4 percent. Taiwan’s Taiex (TWSE) index fell 0.4 percent, while South Korea’s Kospi index slid 0.7 percent.
The Kospi 200 Volatility Index, which measures the volatility of options tied to Kospi 200 Index, fell for a fifth day, dropping 2.4 percent to the lowest level in the history of Korea Exchange data going back to 2003.
The ruble strengthened 0.6 percent against the dollar and India’s rupee advanced 0.4 percent. The Indonesian rupiah tumbled 1.6 percent to a three-year low after the government said its failure to reach its spending target last year crimped economic growth.
Russia is “definitely catching up with global markets,” Martial Godet, head of strategy at BNP Paribas CIB in London, said by phone.
OAO Novolipetsk Steel, a Russian steelmaker, rallied 6.9 percent in Moscow in the first day of trading in the new year. OAO Mechel, Russia’s biggest coking-coal producer, increased 7.1 percent, the biggest advance since Sept. 14.
Arabtec Holding Co. surged 5.3 percent to the highest level in more than two months in Dubai after the United Arab Emirates’ biggest construction company by market value won a contract to build Abu Dhabi’s branch of the Louvre museum.
Samsung Electronics, the world’s largest maker of mobile phones and televisions, slid 1.3 percent in Seoul as its 8.8 trillion won ($8.3 billion) operating profit fell short of the most optimistic analysts’ estimates. HTC, Asia’s second-largest smartphone maker, slid 4 percent in Taipei. Its fourth-quarter operating profit was NT$600 million ($21 million), compared with the NT$1.11 billion average of 20 analyst estimates compiled by Bloomberg, as a lack of new models prompted a loss of market share.
“Smartphones have been selling like hotcakes, so the expectation is a lot higher,” Tan Lip Kwang, who helps manage the equivalent of $1 billion at K&N Kenanga Holdings Bhd., said by phone in Kuala Lumpur. “Samsung is very export-oriented and their weighting in the index is quite high. Any disappointment will cause the share price to shoot down.”
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 6 basis points, or 0.06 percentage point, to 258, according to JPMorgan Chase & Co.’s EMBI Global Index.
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