Emerging-market stocks fell the most in seven months, erasing 2013 gains after Federal Reserve minutes sparked concern the U.S. may curtail stimulus and declining commodity prices dragged producers lower.
United Co. Rusal, the world’s biggest aluminum producer, slumped to a 3 1/2-month low in Moscow. New World Resources Plc, the largest Czech coking-coal producer, dropped the most in three weeks after its net loss was more than analysts estimated. Belle International Holdings Ltd., a women’s footwear maker, plunged the most on record in Hong Kong after saying profit will be at the lower end of analysts’ estimates.
The MSCI Emerging Markets Index slid 1.4% to 1,053.21 at 2:10 p.m. in London, the most since July 23. Several Federal Reserve policy makers said the central bank should be ready to vary the pace of its $85 billion in monthly bond purchases, according to minutes of a meeting released yesterday. A report today showed euro-area services and factory output contracted. The Standard & Poor’s GSCI Index of 24 raw materials fell to a one-month low.
“Easing the U.S. stimulus will siphon away some of the liquidity and that’s affecting investors’ sentiment because it’s this liquidity that fueled the rally in emerging stocks,” Allan Yu, who helps manage about $11 billion at Metropolitan Bank & Trust Co., said by phone from Manila.
The 21 countries in the developing-nations gauge send about 17% of their exports to the U.S. and 26% to the European Union on average, data compiled by the World Trade Organization show.
Emerging-market stocks may enter a more “significant correction” after underperforming developed-nation shares this year, according to JPMorgan & Chase Co.
“Fundamentals and technicals are weakening,” JPMorgan strategists led by Adrian Mowat wrote in a report yesterday.
Materials, telecom services and energy stocks led declines this year among 10 industry groups in the MSCI gauge, retreating at least 3.1%, data compiled by Bloomberg show. Telekomunikacja Polska SA, Poland’s largest phone company and the worst-performer in the emerging-markets gauge, fell 45% in 2013 after the company cut its dividend proposal as fourth-quarter revenue slumped.
Russia’s Micex Index fell 1.2% today, heading for the lowest close this year. Rusal slid 3.2% and OAO Mechel, billionaire Igor Zyuzin’s mining company, lost 2.9%. OAO Gazprom, the country’s biggest natural gas producer, lost 1%.
Oil slid 1.3% in New York, while nickel, copper and zinc led industrial metals lower in London.
AFK Sistema dropped 4.9% in London, heading for the lowest close this year, after the Russian company said its Indian phone-operator unit is closing services in 10 of its regions of operation. Sistema also plans to participate in some of India’s spectrum auctions starting March 11, it said in a statement today.
The Czech PX Index fell 1.3% today. NWR tumbled 4.7% down after the Amsterdam-registered company said the net loss for October to December was 48.6 million euros ($64 million), exceeding the 35 million-euro estimated loss in a Bloomberg survey of analysts.
Hungary’s BUX Index lost 1.7%, heading for the lowest close since Jan. 8, as OTP Bank Nyrt., Hungary’s largest lender, plunged 2.7% in Budapest. The forint weakened 0.5% versus the euro, snapping a three-day winning streak.
Poland’s WIG20 Index retreated 0.9%, while the zloty slid 0.4% against the euro. Telekomunikacja Polska fell 4% to the lowest level on record. Banco Espirito Santo SA downgraged the stock to sell from neutral today.
Brazil’s Bovespa Index lost 0.2% in early trading today. The gauge has tumbled 8.1% this year, the biggest decline among world equity gauges tracked by Bloomberg.
All 10 industry groups in the MSCI Emerging Markets Index fell, with measures for consumer-discretionary, material, energy and financial stocks sliding at least 1.5%. The broader gauge lost less than 0.1% this year, trailing the MSCI World Index’s 4.4% advance. The emerging-markets index trades at 10.5 times estimated earnings, compared with the MSCI World’s 13.7 times, data compiled by Bloomberg show.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 4 basis points, or 0.04 percentage point, to 281, according to JPMorgan Chase & Co.’s EMBI Global Index.
India’s Sensex fell 1.6%, the biggest drop since July 23. Shriram Transport Finance Co. tumbled 7.5% in Mumbai. TPG Capital is selling a $300 million stake in Shriram, according to terms obtained by Bloomberg News.
The Hang Seng China Enterprises Index declined 2.2% today, erasing this year’s gains. The Shanghai Composite Index fell 3%, the most since Nov. 30, 2011. Vietnam’s VN Index sank 3.7%, the sharpest loss in Asia.
Belle slumped 17%. The company expects its 2012 net profit will be “marginally higher” than the previous year’s and “will fall within the lower end” of analysts’ estimates, it said in a filing last night. Daphne International Holding Ltd., a rival of Belle, lost 6.4%.
Evergrande Real Estate Group Ltd., China’s biggest developer by sales volume, slid 1.6%, the lowest level in more than two months. Soho China Ltd., the biggest developer in Beijing’s central business district, dropped 1.8%.
China’s government told local authorities to curb real estate speculation, according to a statement yesterday. Chinese cities that have had “excessively fast” price gains should promptly impose home-purchase restrictions if they’ve not done so already, according to the statement released yesterday after a State Council meeting headed by Premier Wen Jiabao.
“We are in a tricky period of policy risk for China,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP in London, said by e-mail. “There may be some more tightening related to the property sector and a slowdown in credit.”
China Minsheng Banking Corp. fell 5.3% in Hong Kong on speculation more restrictions on the property industry will hurt demand for bank loans and construction materials.
China’s central bank drained 910 billion yuan ($146 billion) from the financial system this week, according to Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong. That was the biggest withdrawal since Bloomberg started compiling the data in 2008.
Jollibee Foods Corp., the largest Philippine fast-food company, surged 5.9% to a record in Manila, the biggest gain in the MSCI Emerging Markets Index. The stock rallied a fifth day since it reported on Feb. 14 that profit gained 15% in 2012.