Bloomberg News

Emerging Stocks Decline to Three-Month Low on Cyprus Woes

March 22, 2013

Emerging-market stocks fell to a three-month low as Russia spurned a bid for a loan to Cyprus and Thailand’s bourse said it may increase margin requirements, sparking the biggest drop in the SET Index since October 2011.

OAO TNK-BP Holding slid to a record in Moscow as OAO Rosneft (ROSN) said it won’t buy minority stakes. The Thai index capped its steepest weekly drop since 2008. PetroChina Co. (857), the nation’s largest energy producer, sank to the lowest since Dec. 3 as net income fell 13 percent. Companies of billionaire Eike Batista, including OGX Petroleo & Gas Participacoes SA, slumped.

The MSCI Emerging Markets Index (MXEF) lost 0.7 percent to 1,015.47 in New York. The gauge slipped 2.6 percent this week, its biggest five-day retreat since May. Stocks fell this week as Cyprus struggles to avoid a collapse of its banking system. Lawmakers of the Mediterranean island approved capital controls and the creation of a fund to pool state assets.

“Cyprus tells us the European Union is still working through its own financial crisis,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said in a phone interview from Atlanta. His firm oversees about $48 billion, including developing-nation shares. “That’s going to keep a lid on economic growth.”

The MSCI Emerging Markets Index has lost 3.8 percent this year, compared with a 7 percent gain in the MSCI World Index (MXWO) of developed-country stocks. The measure trades at 10.7 times estimated 12-month earnings, compared with the MSCI World’s multiple of 14.2, according to data compiled by Bloomberg.

Emerging ETF

The iShares MSCI Emerging Markets ETF added 0.4 percent to $41.96, paring the exchange traded fund’s weekly retreat to 1.9 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, fell 5.3 percent to 19.08.

Brazil’s Bovespa dropped 0.6 percent as OGX slumped 9.2 percent. Shares of OSX Brasil SA, Batista’s shipbuilding and oil services unit, plunged 17 percent to a record low.

Infraestructura Energetica Nova SAB, the Mexican unit of U.S. natural-gas distributor Sempra Energy, jumped 17 percent in its trading debut in Mexico City.

Russian equities fell, capping their biggest weekly retreat since May. The Micex Index lost 1.2 percent today in Moscow, extending its weekly slump to 3.6 percent.

Cyprus was “not able to get the support” it wanted, the Mediterranean island’s Finance Minister Michael Sarris said today after checking out of his hotel in downtown Moscow. Euro- area finance ministers expect a proposal from Cyprus “as rapidly as possible” to raise the 5.8 billion euros ($7.5 billion) needed to trigger emergency loans, they said yesterday.

Record Low

TNK-BP Holding dropped 12 percent to a record low. Rosneft doesn’t plan to buy TNK-BP’s minority stakes, Rosneft Chief Executive Officer Igor Sechin said today in an interview broadcast by national television channel Rossiya 24, after completing the biggest takeover in Russian history yesterday.

Thailand’s SET Index (SET) fell 3.3 percent, the most among emerging markets, on concern the bourse may increase margin requirements on equity trading. Power producer Glow Energy Pcl (GLOW) sank 5.6 percent in Bangkok and Airports of Thailand Pcl (AOT) slumped 3.4 percent declining for a second day.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 0.4 percent. The Jakarta Composite Index (JCI) slid 1.7 percent. The Philippine Stock Exchange Index added 0.7 percent. The S&P BSE Sensex slid 0.3 percent today, capping its worst weekly loss since December 2011.

PetroChina lost 1.4 percent to the lowest since Dec. 3. Net income dropped last year, the company said in a statement yesterday, coming in below analyst estimates.

The extra yield investors demand to own developing-nation dollar debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 299, according to the JPMorgan Chase & Co. EMBI Global Index.

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 editor responsible for this story: Darren Boey at dboey@bloomberg.net


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