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Emerging Stocks Pare Quarterly Slump on Korean Builders, Turkey

March 29, 2013

Emerging Stocks Pare Quarterly Slump as Korean Builders Rally

A foreign currency dealer looks at a computer screen in a dealing room at the Korea Exchange Bank headquarters in Seoul. Photographer: SeongJoon Cho/Bloomberg

Emerging-market stocks rose to a two-week high, paring the worst start to a year since 2008, as investors speculated South Korea will announce measures to aid the nation’s property market and Turkey’s trade deficit unexpectedly narrowed.

Hyundai Development Co. (012630) jumped to an 11-month high in Seoul. Haci Omer Sabanci Holding AS (SAHOL), Turkey’s second-largest industrial group, had its biggest rally in almost two weeks. NHN Corp., a South Korean search-engine operator, advanced the most since March 19 after Shinhan Investment Corp. said prospects of its mobile messenger application will bolster its share price. Gamuda Bhd. (GAM) fell the most in two months in Kuala Lumpur after at least two brokerages downgraded the stock.

The MSCI Emerging Markets Index (MXEF) added 0.2 percent to 1,034.56 at 8 p.m. in Moscow, trimming its quarterly decline to 2 percent, with 221 stocks advancing and 83 falling today. South Korea announced yesterday it will unveil a stimulus package in April to spur the property market and revive an economy that the government expects to grow 2.3 percent this year, lower than a 3 percent forecast made in December.

“Most governments are trying to implement policies to boost economic growth and employment,” said Prapas Tonpibulsak, who helps manage about $5.5 billion as Chief Investment Officer at Krungsri Asset Management Co. in Bangkok. “This should benefit equity investments.”

Reports today showed U.S. consumer spending increased the most in five months in February and confidence among American consumers unexpectedly rose in March from the prior month.

Less Trading

South Korea’s Kospi (KOSPI) Index climbed 0.6 percent to a three- week high. The Istanbul Stock Exchange National 100 Index (XU100) advanced 0.8 percent, and Russia’s Micex Index added 0.3 percent. Most markets were shut in Asia, Europe and Latin America for holidays.

Trading volumes were 68 percent less than the 30-day average for the Micex, 12 percent below for Turkey’s benchmark gauge and 5.7 percent under the average on the Kospi.

Sabanci added 1.4 percent. The trade deficit was $6.96 billion in February, down from $7.29 billion the previous month. The median estimate among six economists in the survey predicted an $8.8 billion shortfall.

Profit Drops

OAO Raspadskaya, a coal producer, fell 2.2 percent after saying it doesn’t plan dividends for 2012.

OAO Aeroflot (AFLT), Russia’s biggest airline carrier, rose 0.9 percent after putting its third new Boeing 777-300ER into service, according to a press release on its website.

Turkey’s ISE 100 index climbed 9.8 percent this quarter. Standard & Poor’s raised the country’s debt rating to BB+, one step below investment grade, on March 27. Russia’s Micex slipped 2.5 percent in the first quarter on concern Cyprus’s debt crisis may wipe out as much as $60 billion in Russian deposits and loans.

A gauge of technology stocks in the MSCI Emerging Markets Index (MXEF) advanced 0.6 percent today, the most among 10 industry groups. The broader measure slipped 1.9 percent this month, trailing a 2.1 percent gain in the MSCI World Index (MXWO) of developed-country stocks. The developing-nations gauge trades at 10.5 times estimated 12-month earnings, compared with the MSCI World (MXWO)’s multiple of 13.4, data compiled by Bloomberg show.

The emerging-markets gauge’s worst start to the year since 2008 compares with the MSCI World’s 7.2 percent gain. Global equities slumped in 2008 as the U.S subprime mortgage crisis and collapse of Lehman Brothers Holdings Inc. sparked the global financial crisis.

Earnings Disappoint

The developing markets’ equities are trailing those of developed countries after most of their companies missed analyst profit estimates for the last five quarters and economic expansions from China to Brazil slowed to the weakest rates since 2009. A majority of MSCI World (MXWO) companies beat earnings projections, while the pace of U.S. growth has rebounded.

In Asia, Thailand’s SET Index gained 1.1 percent and Taiwan’s Taiex Index added 0.7 percent. China’s Shanghai Composite Index (SHCOMP) was little changed.

Trading volumes in the FTSE Bursa Malaysia KLCI Index and Taiex were at least 30 percent below the 30-day average, while volumes for the Shanghai Composite were 24 percent lower.

China’s yuan advanced to a 19-year high after the central bank raised the reference rate to the strongest level in more than 10 months. The South Korean won completed its biggest monthly drop since May while the Malaysian ringgit had its largest weekly gain in more than two months.

Property Stocks

Hyundai Development rallied 3.9 percent, the highest close since April 26. GS Engineering & Construction Corp. (006360) and Daewoo Engineering & Construction Co. climbed by at least 2.5 percent.

A supplementary budget and details of the measures to encourage property sales will be released over time, the South Korean Finance Ministry said in a statement yesterday.

NHN surged 3.4 percent. The growth of the company’s Line mobile messenger application will stand out in the second half of the year, Shinhan Investment said in a report today.

Mirae Asset Securities Co. (037620) jumped 5.2 percent in Seoul, the most since Feb. 13. Woori Investment & Securities Co. advanced 2.6 percent and Samsung Securities Co. Ltd. added 1.7 percent.

A cut in South Korean interest rates in April is possible, which should boost sentiment toward stock brokerages, Jun Bae Seung, an analyst at Shinyoung Securities, said by phone today.

Gamuda (GAM), a Malaysian builder, dropped 2.2 percent, the most since Jan. 21. The stock was downgraded to hold from buy at Maybank Investment Bank Bhd. The stock was also reduced to hold at Hong Leong Investment Bank Bhd., according to a report today.

To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net; Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

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


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