Bloomberg News

Emerging ETF Declines as Hungary to Brazil Stocks Slide

January 22, 2013

The exchange-traded fund (EEM:US) tracking developing-nation shares slipped for the first time in three days, as Hungarian lenders tumbled and Brazil’s benchmark index fell to an 11-day low.

OTP Bank Nyrt. (OTP), Hungary’s largest lender, led a 2.3 percent plunge in the nation’s benchmark equity index on concern a leadership change at the central bank may lead to non- traditional easing steps. Oi SA (OIBR4), Brazil’s third-biggest telephone company, sank the most since August after replacing its chief executive officer. Samsung Electronics Co. (005930) jumped the most since Jan. 10, sending emerging technology (MXEF0IT) shares higher, as a strengthening yen lifted the outlook for exporters.

The iShares MSCI Emerging Markets Index lost 0.2 percent to $44.71 in New York, dropping from a one-week high. The MSCI Emerging Markets Index (MXEF) added 0.1 percent to 1,079.07 even as 396 stocks fell while 360 rose. The benchmark gauge of developing- nation equities gained 0.7 percent last week to trade at 10.9 times estimated 12-month earnings, within 1 percent of the highest level since May 2011.

“There are many investors who still do not believe that we’ve entered a different cycle than the one we’ve been in,” Christopher Palmer, director of global emerging markets at Henderson Global Investors Ltd., said by phone from London. “There is some concern about the weakness that is still permeating European economies, and some investors have gotten very used to the idea of doubting any information or data they hear from China and will want to see more confirmation.”

Economic Indicators

Fifty-day volatility on the iShares MSCI Emerging Markets Index fell to 11.59, the lowest in at least a decade. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, climbed 2.5 percent to 16.24.

Sales of U.S. existing homes unexpectedly dropped in December, constrained by the lowest supply of properties in more than a decade. Purchases fell 1 percent to a 4.94 million annual rate last month, figures from the National Association of Realtors showed today.

“All the economic indicators are more linked than ever before,” Palmer said. “Any information from a big economy like China or the U.S. is going to play a very big role for emerging markets.”

China’s economic growth accelerated for the first time in two years amid government efforts to revive demand, data released Jan. 18 revealed. The nation’s unexpected surge in December exports renewed concern from analysts at Goldman Sachs Group Inc., UBS AG and Australia & New Zealand Banking Group Ltd. that statistics from the nation can be unreliable.

Brazil, Hungary

Brazil’s Bovespa (IBOV) fell 0.3 percent in its third day of losses as preferred shares of Oi dropped the most five months. Oi, Brazil’s fourth-largest mobile operator by market share, fell 7.9 percent to become the worst performer on the emerging markets gauge after it named Jose Carneiro da Cunha as its new CEO, replacing Francisco Tosta Valim Filho.

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- biggest steelmaker, sank 6.1 percent after Banco BTG Pactual SA cut its recommendation on the stock to sell. Cyrela Brazil Realty SA Empreendimentos e Participacoes, Brazil’s biggest homebuilder, slid 2.7 percent after 2012 sales dropped.

Hungary’s BUX Index sank the most in seven months and the forint weakened 0.4 percent to 294.18 against the euro. Hungarian Economy Minister Gyorgy Matolcsy may be nominated to replace central bank President Andras Simor in March, hvg.hu reported after the market closed yesterday. Matolcsy has urged the bank to “bravely use unorthodox tools” in providing economic stimulus, according to the report.

IMF Aid

Hungary, which requested International Monetary Fund aid in November 2011, stands little chance of obtaining a bailout as views on the type of bailout and Hungary’s growth prospects differ too much between the IMF and the Cabinet, Mihaly Varga, Hungary’s chief negotiator, said in an M1 television interview.

OTP Bank, which accounts for 32 percent of the benchmark BUX Index, sank 3.1 percent in Budapest, the most since Oct. 18.

Russia’s Micex Index added 0.2 percent during the day as OAO Magnit, the nation’s biggest food retailer, led a retreat in consumer stocks. Vietnam’s VN Index lost 1.1 percent as the nation’s President Truong Tan Sang said the country must accept “low” growth amid a restructuring of the economy. The Philippine Stock Exchange Index (PCOMP) slipped 1.1 percent from a record.

Turkey’s lira weakened while the ISE National 100 Index climbed 0.4 percent after the central bank cut interest rates for the second time in three months as it seeks to prevent investment inflows from driving up currency.

Energy Stocks

Akfen Holding AS (AKFEN), whose operations range from airport construction to investments in hydroelectric power, surged 7.8 percent in Istanbul, the highest close since July 2011. The company will ask the Turkish market regulator for permission to issue 145.5 million bonus shares in a plan to double paid-in capital from its own funds.

The MSCI Emerging Markets/Energy Index fell 0.3 percent, the most among 10 industry groups in the broader index. Technology shares jumped 0.7 percent, leading gains. The benchmark MSCI Emerging Markets Index has risen 2.3 percent this month, trailing the 4.1 percent increase in the MSCI World Index (MXWO) of developed countries.

Korea Gas Corp. (036460), the world’s biggest liquefied natural gas importer, tumbled 6.8 percent, the most since September 2009. The company decided not to sell 5.4 trillion won ($5.1 billion) of asset-backed securities after getting guidelines from the Korea Accounting Standards Board, the Korea Economic Daily reported today, citing an unidentified company official.

OAO Gazprom, Russia’s biggest oil and gas company, fell 1.2 percent in Moscow, the most since Nov. 27.

Strengthening Yen

Samsung, the world’s largest maker of mobile phones and TVs, advanced from a one-month low. The yen strengthened 1 percent against the dollar, bolstering the outlook for exporters including Samsung which competes with Japanese companies. A stronger yen cuts the value of earnings for Japanese exporters.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 264 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Gan Yen Kuan in Kuala Lumpur at ykgan@bloomberg.net; Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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Companies Mentioned

  • EEM
    (iShares MSCI Emerging Markets ETF)
    • $41.5 USD
    • -0.85
    • -2.05%
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