Bloomberg News

Emerging Market Stocks Fall as Chinese Developers Tumble

March 04, 2013

Emerging-market stocks fell, led by the biggest tumble since 2008 for China’s property companies, as the government announced measures to cool the real estate market. Materials producers led declines as commodities dropped.

The Shanghai Stock Exchange Property Index retreated 9.3 percent as Poly Real Estate Group Co. (600048) dropped the most since 2009. United Co. Rusal, the largest aluminum producer, slumped to a record low in Moscow on plans to cut output. Miner Vale SA (VALE3) led commodity shares lower on Brazil’s Bovespa index. The forint fell to a five-week low against the euro as Hungary mulls using central bank reserves to stimulate its economy.

The MSCI Emerging Markets Index (MXEF) slipped 1.1 percent to 1,041.28 in New York, the lowest since December 17. Raw materials tumbled a fifth day after data yesterday showed China’s service industries grew at the slowest pace since September last month and the cabinet tightened mortgage rules to cool the property market, spurring concern the measures will hamper an economic rebound.

“This news out of China is significant as it marks an important point in the real estate cycle,” Michael Shaoul, chairman of New York-based Marketfield Asset Management LLC, which oversees more than $6 billion, said in a telephone interview today. “They had eased the pace of tightening and this is a very clear message they’re coming back for more. This is a dangerous point in the cycle and it’s highly likely they’ll end up going too far.”

Second Day

The developing nations gauge fell a second day, adding to a 1.4 percent slump last month, the biggest drop since May. The emerging-markets index has slid 1.3 percent this year, compared with a gain of 5 percent of the MSCI World Index of developed- country stocks. The measure of developing nations trades at 10.4 times estimated 12-month earnings, compared with the MSCI World’s 13.9 times, according to data compiled by Bloomberg.

The iShares MSCI Emerging Markets Index exchange-traded fund dropped 0.9 percent to $42.91. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, jumped 1 percent to 18.91.

China’s CSI 300 Index (SHSZ300), representing the nation’s biggest companies in the Shanghai and Shenzhen stock exchanges, fell 4.6 percent, the most since November 2010. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong sank 2.1 percent. The Shanghai Composite Index tumbled 3.7 percent, the most among major benchmark indexes in Asia.

Nine out of 10 industry groups in the MSCI Emerging Markets Index declined as raw materials and financial companies had the biggest losses. The MSCI Emerging Markets/Materials Index slumped 2.1 percent, the biggest drop since July 23, as the Standard & Poor’s GSCI Spot Index of commodities slid 0.3 percent to the lowest since Dec. 24.

Property Stocks

Poly Real Estate slid 10 percent in Shanghai, its second day of declines. China Resources Land Ltd. (1109) and Sino-Ocean Land Holdings Ltd. (3377) both retreated at least 8.9 percent in Hong Kong. Guangzhou R&F Properties Co. lost 11 percent in Hong Kong. China property stocks accounted for the five biggest declines on the MSCI’s emerging-markets index today.

Benchmark gauges in Russia, Hungary and South Africa retreated at least 0.6 percent. Brazil’s Bovespa lost 0.7 percent. Vale, the world’s biggest iron-ore producer, declined 3.4 percent.

OGX Petroleo & Gas Participacoes SA dropped 4.6 percent in Sao Paulo to the lowest since November 2008, after Deutsche Bank AG cut the target price for the stock.

Fabricato SA, a Colombian textile maker, plunged 70 percent, the most on record. The country’s stock exchange held an auction after shares failed to trade on March 1, opening for the first time since regulators suspended trading on Nov. 16.

Rusal retreated 3.5 percent in Moscow. The company will cut 300,000 metric tons of existing capacity in 2013, compared with 4.2 million tons produced last year.

Forint Slumps

The forint declined and Hungary’s BUX Index snapped three days of gains. The country’s former economy minister Gyorgy Matolcsy began his six-year tenure as Magyar Nemzeti Bank president by rewriting the central bank’s founding document to concentrate power in his hands.

The Dubai Financial Market General Index lost 1.9 percent. Arabtec Holding Co., a construction company, dropped 10 percent, falling for a fifth day.

Orascom Construction Industries, the Cairo-based company transferring to Amsterdam, dropped 2.7 percent, the biggest decline since Dec. 6. The company said Egyptian authorities haven’t informed it of new tax claims after imposing a travel ban on billionaire Chief Executive Officer Nassef Sawiris.

Turkey’s benchmark index gained 0.9 percent, rising for a sixth day, the longest winning streak since Jan. 24. Turkiye Halk Bankasi AS (HALKB), a Turkish state-run lender, rose 2.8 percent. Deputy Prime Minister Ali Babacan said he believes Turkey’s antitrust regulator will be “fair and measured” in its probe against 12 banks.

Taiwan, Indonesia

Taiwan’s Taiex index lost 1.2 percent. Indonesia’s Jakarta Composite index retreated 1 percent from a record high, while the rupiah weakened for a second day. Vietnam’s VN Index slid 1.8 percent, snapping a three-day gain.

Hyosung Corp. (004800), a South Korean maker of synthetic and chemical products, fell 6.7 percent in Seoul, after its vice president resigned and sold his stake in the company.

NHN Corp. (035420), South Korea’s biggest Internet search-engine operator, rallied 4.6 percent, the best performer on the MSCI Emerging Markets Index. A decision by the nation’s Regulatory Reform Committee to scrap a proposal to tighten regulations on web-board games should boost sentiment toward game stocks including NHN, Woori Investment & Securities Co. wrote in a report today.

American depositary receipts of Chinese software security company NQ Mobile Inc. (NQ:US) surged 17 percent in New York, the most on record. The company said it will provide its products to subscribers of America Movil SAB, the Mexican wireless carrier controlled by billionaire Carlos Slim. Trading volume was six times the daily average over the past three months.

The extra yield investors demand to hold emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage point, to 286 basis points, according to the JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Maria Levitov in London at mlevitov@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

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


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