Bloomberg News

Emerging Stock Swings at 15-Year Low as Russia Retreats

February 15, 2013

Swings in emerging-market stocks abated to the least since 1997 as the benchmark index capped its best week in a month. Shares in Russia fell while stocks traded in Hong Kong rose for a second day.

OAO Sberbank, Russia’s largest lender, dropped 2.5 percent, while the Moscow Exchange traded below its offer price after raising $498 million in an initial share sale. Harmony Gold Mining Co. and Gold Fields Ltd. fell in Johannesburg as the metal slid to a six-month low. Geely Automobile Holdings Ltd. rose to the highest in more than two years in Hong Kong. Industrias Bachoco SAB, Mexico’s biggest chicken producer, slumped after reporting possible cases of bird flu.

The MSCI Emerging Markets Index rose 0.1 percent to 1,066.52 in New York, bringing this week’s gain to 0.5 percent. The stock gauge’s 50-day volatility slid to 8.06 today, the lowest level since July 15, 1997, according to data compiled by Bloomberg. Consumer confidence in the U.S. rose more than expected to reach a three-month high in February.

“It’s been a pretty good week,” Aryam Vazquez, a New York-based economist at Wells Fargo & Co., said in a telephone interview. “The growth story remains very positive. Today’s data from the U.S. is a little bit livelier. That certainly helps that risk-on sentiment.”

The Standard & Poor’s 500 Index had its seventh weekly gain as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 76.3 in February, beating forecasts. Other reports showed that manufacturing in the New York region unexpectedly expanded this month, while industrial production in the world’s biggest economy shrank in January.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, fell 0.4 percent to $43.99. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, fell 3.2 percent to 15.33, a record low.

Mexico’s IPC index rose 0.6 percent, snapping a four-day decline. Industrias Bachoco dropped 2.1 percent as trading volume was more than triple the three-month daily average.

OGX Petroleo & Gas Participacoes SA, the Brazilian oil company controlled by billionaire Eike Batista, slumped 6.5 percent, for the second-biggest decline in the MSCI emerging markets gauge. The Bovespa index dropped 0.3 percent in Sao Paulo, falling for a third day to the lowest since Dec. 6.

Russia’s Micex Index lost 0.7 percent, while the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 0.2 percent. Hong Kong exchanges were closed for the first three days of the week while mainland Chinese trading resumes Feb. 18 after a five-day break.

Moscow Exchange

Sberbank, the biggest stock in the Micex, dropped 2.5 percent in Moscow. The Moscow Exchange raised $498 million in the biggest initial share sale on the nation’s bourse since 2007, pricing at the bottom of its target range. The stock, which trades under the MOEX RX ticker, was unchanged at 55 rubles in its first day of trading.

Harmony Gold, Africa’s third-largest producer of the metal, dropped 4.8 percent, the most since January 31. Gold Fields fell 5.4 percent to the lowest level since July. Gold futures slumped below $1,600 for the first time since August as Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is recovering, easing pressure for more stimulus measures.

South Africa’s rand declined for the first time in three days, paring its advance this week, after President Jacob Zuma said he will review mining royalties as he comes under pressure to reduce poverty and inequality.

Biggest Gain

A gauge of technology stocks in the MSCI Emerging Markets Index climbed 0.4 percent to a one-month high, the most among 10 industry groups. Commodity stocks in the index retreated.

The broader gauge has risen 1.1 percent this year, trailing the 5.1 percent gain in the MSCI World Index of developed- country stocks. The emerging-markets gauge trades at 10.4 times estimated profit, compared with the MSCI World’s 13.8 times, according to data compiled by Bloomberg.

Equity funds drew inflows of $1.8 billion in the week to Feb. 13, luring less investment than bond funds for the first time in 10 weeks, Markus Rosgen and Yue Hin Pong, analysts at Citigroup Inc., wrote in a report today, citing data from research company EPFR Global. Asian equity funds attracted $535 million, a 23rd week of inflows, slowing from $981 million last week as markets shut for the Lunar New Year holidays.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries slipped three basis points, or 0.03 percentage point, to 272 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

Chinese Stocks

The gauge of mainland Chinese companies rose in its second day of trading this week as New China Life Insurance Co. led gains among insurers. Indonesia’s Jakarta Composite Index climbed 0.5 percent on its fifth day of gains, with trading volumes 67 percent higher than the 30-day average. India’s Sensex slipped 0.2 percent. Markets in mainland China and Taiwan will re-open on Feb. 18 after a week-long holiday.

Geely Automobile, a unit of the Chinese owner of Volvo Cars Corp., surged 7.7 percent to the highest since November 2010. Car sales volume in January increased 67 percent from a year earlier, the company said yesterday.

PT Bank Rakyat Indonesia, the nation’s second-largest lender by assets, advanced 1.8 percent as financial stocks rose the most among nine industry groups in the nation’s benchmark index.

‘Still Positive’

“Overall the growth in the banking sector is still positive,” Alvin Pattisahusiwa, chief investment officer at PT Manulife Asset Management, said by phone in Jakarta.

Dr. Reddy’s Laboratories Ltd., India’s second-biggest drugmaker by market value, slid 3 percent after Bank of America- Merrill Lynch cut the stock to neutral from buy.

Hyundai Merchant Marine Co. slipped 4.3 percent in Seoul to the lowest since March 2007, after reporting an operating loss of 519.8 billion won ($482 million) in 2012.

The won had its biggest weekly gain since December 2011 on speculation South Korean authorities won’t act to curb its advance as the yen rebounded from near a three-year low before a Group of 20 nations meeting.

To contact the reporters on this story: Lyubov Pronina in London at lpronina@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

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


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