Bloomberg News

Emerging-Market Stocks Drop Most in a Week as Energy Shares Slip

February 05, 2013

Emerging-market stocks slid the most in a week, led by energy companies, as China Petroleum & Chemical Corp. sank on a share-sale plan. The rand strengthened after South Africa’s unemployment unexpectedly fell.

China Petroleum, or Sinopec, fell the most since August 2011 in Hong Kong after saying it will raise HK$24 billion ($3.1 billion) from a share sale. ICICI Bank Ltd., India’s second- largest lender by assets, dropped to its lowest since Jan. 24. OAO MRSK Holding declined 1.1 percent on a report Russia will maintain control over its stake in Federal Grid Co. after its merger with MRSK. Petroleo Brasileiro SA slumped to a seven-year low in Sao Paulo on weaker-than-expected earnings.

The MSCI Emerging Markets Index lost 0.5 percent to 1,067.61 in New York. Euro-area retail sales fell 0.8 percent in December, more than economists estimated, led by declines in Germany and Spain. The National Institute of Economic and Social Research said the U.K. economy faces risks of prolonged stagnation. The rand gained 1 percent versus the dollar after the South African unemployment rate fell more than expected in the fourth quarter as more people gave up on seeking work.

“The news flow will still be patchy and volatile,” Christopher Wong, senior investment manager at Aberdeen Asset Management Asia Ltd., which oversees more than $90 billion of regional equities, said by phone from Singapore. “There will be recoveries and shocks, so it is not as rosy at it seems.”

Brazil Stocks

The iShares MSCI Emerging Markets Index (EEM:US) exchange-traded fund, the ETF tracking developing-nation shares, rose 0.1 percent to $43.97 following a 1.3 percent drop yesterday. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, tumbled 7.8 percent to 18.40.

The Standard & Poor’s 500 Index advanced 1 percent as corporate earnings topped analyst forecasts and Dell Inc. agreed to be taken private. Service industries in the U.S. expanded in January at about the same pace as the prior month, driving demand for more workers, data from the Institute for Supply Management showed today.

Brazil’s Bovespa declined 0.2 percent as Petrobras, the state-controlled oil company, tumbled 8.3 percent to the lowest price since August 2005 after reporting earnings before interest, taxes, depreciation and amortization of 11.9 billion reais in the fourth quarter, compared with an average estimate of 14.6 billion reais among analysts surveyed by Bloomberg.

Preferred shares of Itau Unibanco Holding SA, Latin America’s largest lender by market value, jumped 2.5 percent after reporting a reduction in provisions for bad loans in the fourth quarter.

Czech Index

The Czech Republic’s PX index lost 0.9 percent to its lowest close since Dec. 11. Russia’s Micex added 0.3 percent, reversing yesterday’s 0.8 percent slide, as oil rebounded from the biggest loss in two months.

Turkey’s ISE National 100 gauge slumped for the first time in three days, dropping 0.5 percent. Last week’s 5.6 percent drop in MSCI Turkey Index is a “pull-back to get in,” David Aserkoff and Saharsh Kumar, analysts at JPMorgan Chase & Co., said in an e-mailed report today. JPMorgan reiterated its overweight recommendation on Turkish stocks, according to the report.

Hungary’s benchmark climbed 0.9 percent, leading gains among emerging markets in Eastern Europe. Romania’s BET Index rose 0.4 percent as the central bank left its benchmark interest rate unchanged at a record low of 5.25 percent for a seventh consecutive time. The Romanian leu weakened 0.2 percent against the euro, depreciating for a second day.

Won Retreats

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. fell 0.2 percent to 97.66, the lowest close since Dec. 28. Baidu Inc., China’s most used-search engine, dropped 10 percent, the most since September 2011, after the stock was downgraded and analysts lowered price targets.

The Hang Seng China Enterprises Index of companies listed in Hong Kong fell 2.8 percent, the steepest drop since July 23. Taiwan’s Taiex Index slid 0.5 percent and South Korea’s Kospi index lost 0.8 percent. The won retreated as data showed global investors cut their stock holdings last month. The Philippine Stock Exchange Index rose to a record for a third day.

Gauges of energy companies and financial stocks in the MSCI Emerging Markets Index fell at least 0.7 percent, the most among 10 industry groups. The developing-nations measure has added 1.2 percent this year, trailing a 5 percent advance by the MSCI World Index. The emerging-markets index trades at 10.9 times estimated profit, compared with the MSCI World’s 13.7 times, data compiled by Bloomberg show.

Banco de Mexico Governor Agustin Carstens said a “perfect storm” may be forming in the world economy as signs of a recovery spur capital flows to emerging markets and some advanced nations that may lead to asset bubbles.

The ruble gained 0.5 percent versus the dollar as Russia’s inflation for January accelerated 7.1 percent, the fastest pace in 15 months. That bolstered the central bank’s case to resist government calls for lower borrowing costs. Economists projected an increase to 6.9 percent, according to the median of 21 estimates in a Bloomberg survey.

Putin Decree

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage point, to 272 basis points, according to JPMorgan Chase’s EMBI Global Index.

MRSK fell for a second day in Moscow. Russia’s government will maintain control of Federal Grid, Vedomosti newspaper reported today, citing an unidentified official. President Vladimir Putin in November signed a decree, transferring 79.55 percent of Federal Grid’s shares to MRSK. AFK Sistema declined 2.2 percent in London trading, the most since Jan. 10.

E-Star Alternativ Nyrt., the Hungarian energy company that filed for bankruptcy protection in December, tumbled 15 percent, extending its two-day loss to 28 percent, after failing to agree with creditors on an extension of payment deadlines.

Quarterly Sales

Aspen Pharmacare Holdings Ltd., South Africa’s biggest generic drugmaker, rose 3 percent, the most since Dec. 18. The company is in talks for a potential acquisition of U.S. medicine producer Merck & Co.’s Dutch unit, Aspen said.

Sun Pharmaceutical Industries Ltd., controlled by Indian billionaire Dilip Shanghvi, jumped 4.1 percent in Mumbai, the most since November 2011, after the U.S. approved the company’s generic version of Johnson & Johnson’s cancer drug Doxil. ICICI Bank fell 1.3 percent, reversing yesterday’s 0.9 percent gain.

HTC Corp., Taiwan’s largest smartphone maker, sank 6.8 percent in the steepest retreat since Nov. 13. First-quarter sales will be NT$50 billion ($1.7 billion) to NT$60 billion, the company said yesterday, compared with NT$64.8 billion expected by analysts.

Sinopec, Asia’s biggest oil refiner by output, tumbled 6.4 percent in its fourth day of losses. The company will sell 2.85 billion Hong Kong-traded shares at HK$8.45 each, 9.5 percent less than yesterday’s close. It plans to use the money for “general corporate purposes,” it said in a statement yesterday, without giving more details. American depositary receipts of Sinopec added 1.1 percent after dropping to the lowest price since Dec. 28 yesterday.

Planes and Trains

China Southern Airlines Co., the nation’s biggest carrier by passengers, slid 4.3 percent in Hong Kong, while Air China Ltd. and China Eastern Airlines Corp. retreated 3.1 percent. Beijing Capital International Airport., the world’s second- busiest airport by passengers, said regulators will allow it to charge domestic carriers’ international flights the same fees as foreign carriers effective April 1.

CSR Corp., a Chinese trainmaker, rose 4.1 percent in Hong Kong. Zhuzhou CSR Times Electric Co., which supplies electrical systems for China’s railways, gained 4.5 percent.

“Railway and industrial stocks are moving because they are laggards during the recent market rally that’s mainly being driven by financials,” Wang Zheng, chief investment officer at Jingxi Investment Management Co., which manages $120 million, said in Shanghai.

To contact the reporters on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

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


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