Bloomberg News

Emerging Market Stocks Slump Most in Two Months as Samsung Sinks

January 25, 2013

Emerging-market stocks posted the biggest weekly drop in two months after Samsung Electronics Co. said the won’s strength is hurting profits and Kia Motors Corp. (000270) reported a slump in earnings.

Samsung, the maker of mobile phones and TVs that has the biggest weighting on the MSCI Emerging Markets Index, dropped on Jan. 25 to an eight-week low in Seoul, while Kia Motors sank the most since Nov. 5. Turkiye Garanti Bankasi AS (GARAN) and Akbank TAS (AKBNK) slipped for the first time in 10 days as Credit Suisse Group AG called for an end to the Turkish bank rally. Russia’s United Co. Rusal slid to the lowest level since Dec. 4 after Goldman Sachs Group Inc. cut the stock to sell. Brazilian markets were closed.

The MSCI Emerging Markets measure lost 0.3 percent to 1,069.12 in New York on Jan. 25, as an exchange-traded fund of developing-nation stocks sank to the lowest in four weeks. The index dropped 1.1 percent last week, the most since Nov. 16. Samsung said the strengthening won may cut operating profit by at least 3 trillion won ($2.8 billion) this year. Kia Motors reported a 51 percent decrease in fourth-quarter operating profit as the stronger Korean currency eroded the value of its exports.

“For Asian companies, the currency issue is the biggest risk factor in the foreseeable future,” Laurentia Amica Darmawan, who helps manage about $530 million at PT First State Investments Indonesia, said by phone in Jakarta. “It will go on until we have clarity on how long the monetary easing from various countries will last.”

South Korea’s Kospi index lost 0.9 percent, the most among major benchmark gauges in Asia.

Overturning Achievements

The biggest developing nations risk overturning the achievements of the past decade by increasing the state’s role in the economy, according to Nouriel Roubini. Brazil, Russia, India and China have been moving away from market economies recently, Roubini, dubbed Dr. Doom for predicting hard times before the global financial crisis began in 2008, said.

“BRICs have been hyped up too much,” Roubini said in an interview today at the World Economic Forum’s annual meeting in Davos, Switzerland. “Too much state role in enterprises, banks, resource nationalization, protectionism, lack of structural market-oriented reforms that increase the size of the private sector -- this is happening in most of the BRICs.”

The iShares MSCI Emerging Markets Index (EEM:US) exchange-traded fund, the ETF tracking developing-nation shares, declined 0.3 percent to $44.16, the lowest since Dec. 28. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, advanced 1.5 percent to 16.46.

New Homes

Purchases of new U.S. homes unexpectedly dropped in December, with sales declining 7.3 percent to a 369,000 annual pace, Commerce Department figures showed today in Washington. The Standard & Poor’s 500 Index rose 0.5 percent in its eighth day of gains, the longest winning streak since 2004, as Starbucks Corp. and Procter & Gamble Co. reported increased profit.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. fell for a third day, sliding 0.9 percent to 99.61 and extending its weekly slump to 2 percent, the most in two months. Ctrip.com International Ltd. (CTRP:US) sank 13 percent on concern plans to offer discounted plane tickets will reduce profit.

The Hang Seng China Enterprises Index slid 0.8 percent, the steepest decline since Jan. 16. Vietnam’s VN Index (VNINDEX) jumped 3.5 percent, the largest gain in Asia. Mexico’s IPC Index added 0.3 percent.

Turkish Banks

Turkey’s ISE National 100 Index (XU100) dropped 1.9 percent in its steepest decline since May 23, while South Africa’s FTSE/JSE Africa All-Share Index (JALSH) retreated 0.2 percent. Russia’s Micex added 0.7 percent as oil advanced for a second day.

Garanti, the biggest Turkish bank by market value, and Akbank, the lender part-owned by Citigroup Inc., lost 3.8 percent. Credit Suisse changed its view on Turkish banks to neutral from positive, saying the net interest margin peaked in 2012 and banks are “vulnerable to potential risk factors that the market has been neglecting.”

Rusal, the world’s largest aluminum producer, fell 1.8 percent in its second day of declines. Goldman Sachs cut the stock from neutral, citing a negative outlook for aluminum prices, according to an e-mailed note.

CEZ AS (CEZ), the biggest Czech utility, had its worst weekly slump in 16 months as the price of electricity tumbled to an all-time low. The stock fell 0.8 percent to 617 koruna ($32.47) in Prague, adding to a weekly loss of 5.5 percent. That was the lowest close since October 2008 and the steepest weekly retreat since September 2011.

Gold Miners

AngloGold Ashanti Ltd. (ANG), Harmony Gold Mining Co. and Gold Fields Ltd. (GFI) declined more than 2.5 percent in Johannesburg as precious metal declined for a third day. Cia de Minas Buenaventura SA, Peru’s biggest precious-metals producer, and Rio Alto Mining Ltd. declined in Lima.

A gauge of technology stocks led declines among 10 industry groups in the MSCI Emerging Markets Index, falling 1.3 percent, followed by industrial stocks. The broader measure has added 1.3 percent this year, trailing a 5 percent increase by the MSCI World Index. (MXWO) The developing-nations index trades for 11 times estimated profit, compared with the MSCI World’s multiple of 13.6, data compiled by Bloomberg show.

Asian Currencies

Asian currencies fell this week, with the Bloomberg- JPMorgan Asia Dollar Index snapping a four-week rally, as a slide in the Japanese yen fanned concern regional central banks will intervene to prevent gains that may hurt exports. The won had its biggest weekly drop since May after rising 8.3 percent against the dollar in 2012. The Thai baht fell from a 17-month high this week, snapping a seven-week rally. Malaysia’s ringgit had its worst weekly slump since June.

Samsung dropped 2.5 percent, declining for a third day. Kia Motors, South Korea’s second-largest automaker, tumbled 4.9 percent. Hyundai Motor Co. (005380), which owns 34 percent of Kia, yesterday reported fourth-quarter profit that also missed average analyst estimates. The stock sank 3.4 percent today.

Air China Ltd. (601111), the nation’s biggest carrier by market value, tumbled 6.1 percent, the most since Oct. 18, 2011. Jet kerosene prices rose to the highest level since Jan. 10 yesterday, its sixth day of gains.

Reliance Communications Ltd. (RCOM), India’s third-largest mobile- phone company by subscribers, surged 7.6 percent, the biggest gain in the MSCI Emerging Markets Index. The Economic Times reported that the company is in talks with Reliance Industries Ltd. to lease a telecommunications tower and sell a stake in a tower unit.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries tumbled 10 basis points, or 0.10 percentage point, to 253, according to JPMorgan Chase & Co.’s EMBI Global Index.

Emerging-market funds took 70 percent of this week’s total equity inflow, EPFR Global said in an e-mailed report on Jan. 25. The pace of equity fund inflows ebbed for the week ended Jan. 23 after the International Monetary Fund lowered its forecast for global growth, EPFR said.

To contact the reporters on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net; Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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Companies Mentioned

  • EEM
    (iShares MSCI Emerging Markets ETF)
    • $45.09 USD
    • 0.31
    • 0.69%
  • CTRP
    (Ctrip.com International Ltd)
    • $66.73 USD
    • -0.27
    • -0.4%
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