July 12 (Bloomberg) -- Emerging-market stocks fell for a seventh day on concern the global slowdown is worsening after South Korea unexpectedly cut interest rates and Infosys Ltd. missed profit estimates and reduced its sales forecast.
The MSCI Emerging Markets Index sank 2.2 percent to 912.03 by 10:13 a.m. in New York, the biggest intraday drop since May 23 and set for its longest losing streak since November. The Kospi Index in Seoul and Chinese stocks listed in Hong Kong slid 2.2 percent while oil company Petroleo Brasileiro SA and iron- ore producer Vale SA contributed the most to the Bovespa index’s retreat in Brazil. Benchmark gauges fell at least 1 percent in India, Taiwan, Turkey and Russia.
Infosys, India’s second-largest software exporter, plunged 8.4 percent to push technology stocks lower. The Bank of Korea cut borrowing costs for the first time in more than three years, saying the economy is growing less than expected, while the Bank of Japan altered its stimulus program without expanding it. A report due tomorrow is expected to show China’s economy grew at the slowest pace in three years in the second quarter.
“While central banks are taking steps to help avert a further slowdown in growth, investors aren’t reacting positively because they think lowering the rate alone won’t resolve problems markets are facing,” Kim Jae Dong, the head of equity at SEI Asset Korea Co., which manages about $5.3 billion in assets, said by phone today. “What they want is more drastic fiscal measures that could actually spur companies to spend and increase people’s disposable income.”
Budget Deficit
The U.S. budget deficit probably widened to $60 billion in June from $43.1 billion a year earlier, a Bloomberg survey showed ahead of a report today. Jobless claims in the U.S. decreased by 26,000 in the week ended July 7 to 350,000, the fewest since March 2008, Labor Department figures showed today.
The emerging-markets gauge has fallen 0.5 percent so far this year, compared with a 1.7 percent gain in the MSCI World Index. Shares in the developing-nation measure are trading at 9.9 times estimated earnings, compared with the MSCI World’s multiple of 12, according to data compiled by Bloomberg.
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, slid 2.3 percent to $37.51.
The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 8.2 percent to 28.81, the most in three weeks.
The Bovespa sank 1.8 percent as renewed concern the global recovery is faltering pushed commodities lower, dimming the outlook for Brazilian producers. Vale fell 2.2 percent and Petrobras, as Petroleo Brasileiro is known, lost 2 percent.
Tim Participacoes dropped 4.9 percent, the most since May 3. Communications Minister Paulo Bernardo said the Brazilian division of Telecom Italia SpA may be blocked from selling mobile services to new subscribers if the company fails to improve operations as client’s complaints mount, O Estado S. Paulo reported.
The Bank of Korea unexpectedly lowered the benchmark seven- day repurchase rate by 25 basis points to 3 percent, the first cut since February 2009, the central bank said in a statement in Seoul today. Two of 16 economists surveyed by Bloomberg predicted the move while the rest forecast no change.
South Korea’s government bonds jumped, pushing yields to record lows after the rate cut. The won weakened by 0.9 percent.
The rand fell 1.4 percent to its lowest level this month as bond yields dropped to records on speculation South Africa’s central bank will also cut interest rates to stimulate growth.
The benchmark Micex Index lost 1.1 percent in Moscow, with 22 of the gauge’s 30 stocks falling. OAO MRSK Holding, Russia’s largest electricity distribution company, and coal producer OAO Raspadskaya led the retreat, each falling more than 3.5 percent.
Tech Stocks
The Hang Seng China Enterprise Index of mainland companies listed in Hong Kong tumbled to the lowest close since Oct. 10.
China’s economy may have expanded 7.7 percent in the second quarter, according to the median estimate of 35 economists surveyed by Bloomberg. That compares with an 8.1 percent increase in the first quarter and the government’s target for full-year growth of 7.5 percent.
China’s Shanghai Composite Index rose 0.5 percent, erasing an earlier loss, as equity valuations near a three-month low overshadowed concern that earnings growth is slowing.
A gauge of technology companies fell 3.2 percent and led declines among all 10 industry groups in the MSCI Emerging Markets Index. The consumer discretionary index dropped 2.4 percent, the biggest slide since May 23.
Infosys plunged to the lowest level since Sept. 13. Sales in the year ending in March may rise to at least $7.34 billion, Infosys said in a statement today, lower than the $7.55 billion it forecast in April. The BSE India Sensitive Index lost 1.5 percent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell two basis points, or 0.02 percentage point, to 365, according to JPMorgan Chase & Co.’s EMBI Global Index.
