Most emerging-market stocks drop as Spain revives debt concern

April 5 (Bloomberg) -- Most emerging-market stocks fell as Spanish bonds dropped for a third day on renewed concerns Europe won’t contain its debt crisis and speculation Taiwan may impose a tax on share transactions sent the country’s benchmark index to the lowest in two months.

Taiwan Semiconductor Manufacturing Company Ltd., the world’s largest contract maker of chips, lost the most in three weeks, while Turkiye Garanti Bankasi AS, Turkey’s largest bank by market value, fell the most in a month and Banco Santander Brasil SA fell to the lowest since Jan. 17. The MSCI Emerging Markets Index was little changed at 1036.73 by 12:14 p.m. in New York, with 377 stocks falling and 274 rising out of 819 members.

Spanish bonds fell a day after Prime Minister Mariano Rajoy said the nation is in “extreme difficulty.” Taiwanese stocks slumped and the currency weakened after Schive Chi, chairman of Taiwan Stock Exchange Corp., said on April 3 that there’s a “99 percent” chance that the island will introduce the tax to address social inequalities and to raise revenues.

“We are not really going to get a sustainable rally,” said Nicholas Field, who help oversees $21 billion emerging market assets in London at Schroders Plc. For emerging-market stocks to advance, “you need real confidence in a sustained Europe recovery, which we don’t’ have.”

The yield on Spain’s 10-year bonds climbed seven basis points, or 0.07 percentage point, to 5.76% after rising to 5.84 percent, the most since Dec. 13. The MSCI EM Financials Index, a gauge of emerging-market bank shares, retreated 0.5 percent, on concern that the European financial turmoil may cut the funding to developing countries.

Banco do Brasil

Turkey’s Turkiye Garanti fell 2.2 percent. Banco Santander dropped 2.8% after Banco do Brasil, Latin America’s largest bank, said it will cut interest rates and increase credit limits for clients. Brazil’s Bovespa benchmark index gained 0.5% after a report showed annual inflation declined to a 17-month low last month. MRV Engenharia & Participacoes SA, Brazil’s fourth-biggest homebuilder by revenue, rose 3.3% as consumer prices rose 5.24% after increasing 5.85% in February.

Mexico’s markets are closed for a holiday.

The IShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF to track developing-nation shares, rose 0.5% to $42.74. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, fell 2.2% to 26.

Currencies Weaken

The Czech koruna and the Polish zloty led a drop of emerging market currencies. The koruna lost 0.5% and the zloty fell 0.9% versus the U.S. currency. The Brazilian real dropped 0.2 percent, extending its losses in the past month to 5 percent.

Taiwan’s Taiex Index has slumped 5% since the Economic Daily reported on March 29 that the government was evaluating the proposal.

The Shanghai Composite Index of Chinese stocks rose 1.7% after the government said on April 3 it will more than double the amount foreigners can invest in equities, bonds and bank deposits. The China Securities Regulatory Commission increased quotas for qualified foreign institutional investors to $80 billion from $30 billion.

Industrial & Commercial Bank of China Ltd., the country’s biggest lender, lost 0.7% in Shanghai, as Premier Wen Jiabao said the nation needs to break a banking monopoly of a few big lenders that make easy profits because it’s hard to borrow money elsewhere.

The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong fell 1.1 percent, after returning from yesterday’s public holiday. Markets in India and the Philippines were shut for holidays.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries jumped five basis points, or 0.05 percentage point, to 346, according to JPMorgan Chase & Co.’s EMBI Global Index.

Bloomberg News

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