Emerging-market stocks headed for the longest weekly slump since June as a cut in U.S. stimulus spurred capital outflows and Chinese money-market rates rebounded. Turkey’s lira and South Africa’s rand fell.
Huaxia Bank Co. slid in Shanghai as Chinese shares posted the longest losing streak in 19 years. Hungary’s stock gauge had the biggest decline in emerging Europe, while India’s S&P BSE Sensex rose the most among global markets. The lira slid to a record as the Turkish government continued to dismiss police chiefs amid a corruption probe. The rand fell for a fourth day after Standard & Poor’s kept a negative outlook on South Africa.
The MSCI Emerging Markets Index decreased 0.3 percent to 987.51 as of 11:06 a.m. in London, set for the lowest close since Nov. 13, and its third-weekly slide. The U.S. Federal Reserve said Dec. 18 it will reduce a record bond buying program by $10 billion, while pledging to keep interest rates near zero. China’s seven-day repurchase rate rose to the highest since a record cash crunch in June even after the central bank injected funds.
“Tapering is just not good for emerging-market currencies, and the repeat of last June’s liquidity tensions in China is weighing on financial stocks,” Martial Godet, head of emerging- market equity andderivatives strategy at BNP Paribas SA in Paris, said by e-mail. “Chinese financial tensions should abate. The weakness of EM currencies” may continue into the middle of 2014, he said.
Stock Valuations
The MSCI Emerging Markets Index has lost 6.4 percent this year and trades at 10.4 times projected 12-month earnings. The MSCI World Index has surged 21 percent in the period, and has a multiple of 14.5, data compiled by Bloomberg show.
All 10 industry groups in the developing-nation gauge dropped today, led by utility and health care companies. Ping An Insurance (Group) Co. slid the most on the measure with a loss of 4.6 percent.
The lira led a decline among emerging-market currencies, declining 0.6 percent versus the dollar for a fourth day of losses. Yields on Turkey’s two-year benchmark notes increased 25 basis points to 9.61 percent, the highest since Sept. 3. The government dismissed 14 chiefs at the national police today, NTV television reported, in addition to some 50 yesterday, according to a Bloomberg HT report.
The dismissals came after police detained dozens, including the head of a state bank and the sons of three cabinet ministers, in an inquiry into graft.
Rand Rating
The rand lost 0.6 percent against the greenback, also weakening for the fourth day. While affirming South Africa’s BBB rating, its second-lowest investment grade, S&P said a deterioration in the nation’s current-account and fiscal deficits may prompt a downgrade.
Hungary’s BUX Index decreased 0.8 percent to the lowest level in a week on a closing basis. The nation’s cabinet will discuss “legal solutions” to reduce installments on foreign- currency denominated household loans by as much as 20 percent before elections, newspaper Nepszabadsag reported, citing an unidentified person close to the government.
Yields on Ukrainian bonds due June 2014 fell 57 basis points to 7.9 percent, dropping below 8 percent for the first time since June.
Russia plans to buy $15 billion of Ukrainian bonds, starting with a $3 billion purchase of two-year notes as soon as this year, Russian Finance Minister Anton Siluanov said on Dec. 17. While the cash is enough to cover Ukraine’s financing needs through next year, the country is still grappling with a record current account deficit and an economy mired in a third recession since 2008.
Chinese Liquidity
Russia’s Micex stock index slid less than 0.1 percent, while the ruble was little changed against the central bank’s target basket of dollars and euros.
Huaxia Bank dropped 3.9 percent to the lowest close since Oct 25. The Shanghai Composite tumbled 2 percent, its ninth day of declines, with volumes 60 percent of the three-month daily average. The gauge completed the longest stretch of losses since December 1994 as targeted fund injections by the central bank failed to alleviate the worst cash crunch since June.
The seven-day repurchase rate, a gauge of liquidity in the financial system, increased 100 basis points to a six-month high of 7.60 percent in Shanghai, according to a daily fixing by the National Interbank Funding Center.
The People’s Bank of China conducted short-term liquidity operations recently, it said on its microblog yesterday, without giving details of the recipients, amount or rate charged for the financing. The monetary authority injected 200 billion yuan ($32.9 billion), online financial news provider Netease reported, citing a person it didn’t identify.
Rupiah Low
India’s Sensex climbed to a one-week high. The Philippine Stock Exchange Index sank 1.5 percent. The Jakarta Composite Index retreated for the first time in four days, losing 1.1 percent, as the rupiah weakened to a five-year low.
Thailand’s SET Index slid 0.6 percent, while the baht was poised for its biggest weekly retreat in four months. The currency touched a three-year low today before anti-government protesters rally on the streets of Bangkok to attract support ahead of a major demonstration planned for Dec. 22.
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