Bloomberg News

Emerging Stocks Decline as U.S. to China Data Disappoint

April 01, 2013

Emerging stocks fell for the first time in six days, led by commodity producers, as data from the U.S. to China and Japan came in below economists’ estimates.

Hyundai Motor Co. (005380), South Korea’s biggest automaker, retreated the most in more than a week in Seoul, while the won slid versus the dollar as worsening relations with North Korea heightened the risk of conflict. Sterlite Industries (India) Ltd., the nation’s biggest copper producer, tumbled 4.5 percent after it was ordered to close a smelter. Brazil’s Bovespa index fell as PDG Realty SA Empreendimentos & Participacoes slumped.

The MSCI Emerging Markets Index slid 0.4 percent to 1,031.15, after rallying 1.9 percent last week. Stocks fell as data showed manufacturing in the U.S. expanded less than forecast in March, while the Bank of Japan’s Tankan index of confidence among large manufacturers improved less than estimated. South Korean exports grew less than economists anticipated and a pickup in China’s output trailed projections.

“Global economic reports are reflecting the fact that the glass is not half empty, not half full,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview. “There’s no area in the world that is able to achieve the breakout that could drive enthusiasm in the market right now.”

Eight out of 10 groups in the MSCI Emerging Markets Index retreated today. The broader gauge has slipped 2.3 percent this year, trailing a 6.7 percent gain in the MSCI World Index of developed-country stocks. The emerging-markets measure trades at 10.8 times 12-month projected profit, compared with the MSCI World’s 14.2 valuation, according to data compiled by Bloomberg.

Emerging ETF

The iShares MSCI Emerging Markets exchange-traded fund, the ETF tracking developing-nation shares, fell 1.1 percent to $42.31, after rallying 1.9 percent last week. The Chicago Board Options Exchange prices on the fund and expectations of price swings, advanced 8.7 percent to 18.18.

The Bovespa fell for the first time in four trading days as economists covering Brazil raised their 2014 inflation forecasts. Homebuilder PDG Realty, dropped 1.9 percent, leading consumer stocks lower.

Brazilian equities are handing investors the worst returns in Latin America as companies post the longest streak of earnings misses in six years. Forty-two (IBOV) of the Bovespa index’s 64 members trailed analysts’ earnings estimates in the fourth quarter, according to data compiled by Bloomberg. It was the fifth straight period that more than 50 percent the companies included in the benchmark fell short of projections, the longest string of disappointments since 2007.

Russian Shares

Russian shares fell for the first time in four days as crude sank, dulling the appeal of equities in the world’s largest energy exporter. OAO Rosneft and OAO Lukoil, Russia’s largest oil producers with a combined 20 percent weighting in the Micex, fell 0.9 percent and 1.3 percent, respectively.

Hong Kong, Australia, New Zealand and most markets in Europe are closed for public holidays today.

South Korea’s Kospi Index dropped 0.4 percent, the first decline in the measure in six days. Hyundai Motor lost 0.9 percent, the most since March 21, while Samsung Electronics Co., the biggest stock on the MSCI emerging-markets index (MXEF), dropped 1 percent. The won weakened 0.3 percent to a one-week low.

North Korean leader Kim Jong Un called nuclear weapons development one of the nation’s top priorities yesterday, escalating tensions with the South that were reignited after North Korea detonated a nuclear device in February.

Indian equities climbed, rebounding from the first quarterly drop since 2011. Industrial stocks led the gain. Sterlite Industries tumbled to its lowest close since June 4.

Most Chinese stocks rose as gains by property developers and health-care companies offset economic data that missed estimates. The Shanghai Composite Index lost 0.1 percent.

The extra yield investors demand to own developing-nation dollar debt over U.S. Treasuries was unchanged at 308 basis points, according to the JPMorgan Chase & Co. EMBI Global Index.

To contact the reporters on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net; Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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