Bloomberg News

Emerging Stocks Drop From 2-Week High as ECB Holds Rates

March 07, 2013

Emerging-market stocks fell from a two-week high, led by technology companies, after the European Central Bank left rates unchanged as it assesses Italy’s threat to the economic recovery. Brazilian equities advanced.

Ayala Land Inc. (ALI) led declines after the Philippines’ biggest developer said it sold shares at a discount. Samsung Electronics Co., which said it will buy 3 percent of troubled Japanese electronics maker Sharp Corp., dropped the most in five weeks. OGX Petroleo & Gas Participacoes SA drove gains in Brazil’s Bovespa Index (IBOV) as controller Eike Batista signed a financing deal with Grupo BTG Pactual.

The MSCI Emerging Markets Index (MXEF) lost 0.2 percent to 1,057.92 in New York, snapping a two-day gain. The ECB kept its benchmark interest rate at 0.75 percent today. While officials discussed cutting borrowing costs as Italy’s elections caused uncertainty, the consensus was to leave rates unchanged, ECB President Mario Draghi said. The Bank of England left its four- year-old bond-purchase program unchanged.

“Some people were hoping for some more ’help’ from the ECB,” Slim Feriani, the London-based chief investment officer of Advance Emerging Capital Ltd., said by e-mail. “They’re between a rock and hard place and they probably are weighing the pros and cons of whether to cut now, mainly to help the euro, or keep the little ammunition left for rainier days.”

Unemployment Benefits

The iShares MSCI Emerging Markets Index exchange-traded fund (EEM:US) gained 0.3 percent to $43.75. The number of Americans who filed for unemployment benefits fell to a six-week low, sending the Dow Jones Industrial Average to another record high. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, fell 4.9 percent to 16.52.

The MSCI developing nation’s index has climbed 0.3 percent this year, compared with a 6.5 percent gain in the MSCI World Index. (MXWO) It trades at 10.7 times projected 12-month earnings, compared with the MSCI World’s 14.1 times, data compiled by Bloomberg show.

Benchmark stock indexes in Poland, Serbia and Latvia declined. Turkey’s benchmark ISE National 100 Index lost 0.4 percent while Russia’s Micex Index (INDEXCF) was little changed.

Brazil’s Bovespa Index jumped 1.6 percent for the biggest two-day gain among the world’s major stock gauges. Batista’s companies soared after EBX Group Co. said yesterday it signed an agreement with BTG. Oil producer OGX jumped 16 percent, the biggest advance in the emerging markets gauge. Miner MMX Mineracao & Metalicos SA gained 17 percent.

Consumer Stocks

Cia. Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer, dropped 3 percent from a record high as consumer stocks sank after the central bank signaled that it’s prepared to increase interest rates. Multiplus SA, the frequent-flier unit of Latam Airlines Group SA’s Brazil subsidiary, slid 4.8 percent.

The Merval Index (MERVAL) gained 2.9 percent in Buenos Aires, the most since Jan. 29, as shares of Petroleo Brasileiro SA advanced for a second day.

Hungary’s Budapest Stock Exchange Index (BUX) gained 0.8 percent. OTP Bank Nyrt. (OTP), the nation’s largest lender, rose to a two-week high after JPMorgan Chase & Co. raised its target price for the stock by 15 percent.

In North Africa, Egypt’s EGX30 Index (EGX30) rallied 2 percent, the biggest gain since Jan. 2, as investors speculated a court’s suspension of legislative elections starting next month will allow for reconciliation between the nation’s opposing parties.

A gauge of information technology companies in the MSCI Emerging Markets Index dropped 1.1 percent, the most among 10 industry groups. Samsung Electronics (005930), which said yesterday it will invest 10.4 billion yen ($111 million) in Sharp, dropped 2.6 percent, halting a two-day increase.

Gold Index

The FTSE/JSE Africa All-Share Index added 0.7 percent. AngloGold Ashanti Ltd. (ANG), Africa’s largest producer of the metal, rose 6.4 percent, the biggest gain since September 2009, paring six days of declines. The FTSE/JSE Africa Gold Mining Index surged 6.9 percent, the biggest gain since May 2009.

The Philippine Stock Exchange Index (PCOMP) sank 1.6 percent in Manila, the most among Asian benchmark indexes, after closing at a record yesterday. Ayala Land lost 5.6 percent.

South Korea’s Kospi (KOSPI) index fell 0.8 percent, the most since Jan. 25, and the won weakened 0.4 percent against the dollar, the most among 25 emerging market currencies tracked by Bloomberg. The Shanghai Composite Index slid 1 percent on concern regulators will restart approving initial public offerings and data this week will show trade weakened as inflation quickened.

E Ink Holdings Inc. (8069), a Taiwanese maker of liquid crystal displays, jumped 5.7 percent in Taipei to the highest since Dec. 13, before announcing revenue numbers after the market close.

The extra yield investors demand to own emerging-market bonds over U.S. Treasuries fell two basis points, or 0.02 percentage point, to 280, according to JPMorgan Chase’s EMBI Global Index.

To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net; Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net; Darren Boey at dboey@bloomberg.net


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Companies Mentioned

  • EEM
    (iShares MSCI Emerging Markets ETF)
    • $44.96 USD
    • 0.20
    • 0.44%
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