Emerging-market stocks drop to four-month low while lira weakens

Emerging-market stocks fell to a four-month low amid growing evidence that the Chinese economy is slowing. The Turkish lira slumped to a record and Russian equities dropped the most in almost seven months.

The MSCI Emerging Markets Index slid 0.9 percent to 970.98 at 8:31 a.m. in New York, heading for the lowest level since Sept. 6. A private gauge of Chinese service industries declined in December after official reports on services and manufacturing also retreated last week. The lira depreciated as much as 0.7 percent to an all-time low 2.1948 per dollar. Russia’s Micex Index dropped 2.3 percent as trading resumed for the first time this year. South Korea’s won sank the most in six months.

China’s economy, the world’s second largest, expanded at 7.8 percent in the third quarter, sustaining global growth as developed-markets lagged. Janet Yellen is poised for confirmation by the Senate today as head of the Federal Reserve, which begins reducing a bond-buying program this month that has stoked demand for emerging-market and other higher-yielding assets.

“Chinese PMI plays a role -- both the official and HSBC are down,” Michael Ganske, head of emerging markets at Rogge Global Partners Plc in London, said by e-mail. “Expect more volatility and risk to trade heavy, as long as the data is not surprising on the upside.”

The developing-nation index trades at 10 times projected earnings for the next 12 months after falling 3.2 percent this year, data compiled by Bloomberg show. The MSCI World Index has a multiple of 15 after losing 1.1 percent in 2014.

 

China Data

 

A Chinese services-industry gauge compiled by HSBC Holdings Plc and Markit Economics Ltd. decreased to 50.9 in December from 52.5 the previous month. A report last week showed the government’s non-manufacturing gauge fell to a four-month low in December, after two measures of factory output slid.

All 10 industry groups in the developing-nation gauge retreated today, led by industrial shares. OAO Sberbank led the Micex down by the most since June 11, while Dubai’s DFM General Index dropped 1.1 percent and South Africa’s FTSE/JSE Africa All Shares Index retreated 0.5 percent.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong fell for a third day, losing 1.4 percent. India’s S&P BSE Sensex index dropped 0.3 percent to the lowest level since Dec. 19.

 

Turkish Economy

 

Turkey’s Borsa Istanbul 100 Index of shares rose 0.9 percent, snapping a three-day, 3 percent decline. The lira depreciated 0.5 percent to 2.1898 against the dollar and 0.6 percent to 2.9786 per euro, approaching a record 3.0151 set Dec. 27.

Turkish Finance Minister Mehmet Ali Simsek told the Financial Times that lira weakness is bad for the economy. The currency has declined 8 percent against the dollar since a corruption scandal targeting the government was made public Dec. 17.

The ruble depreciated 1.4 percent, heading for the biggest retreat since June. The Micex dropped as shares caught up with declines in offshore receipts. OAO Rosneft slumped 3.1 percent to 243.64 rubles after its London-listed stock slid 4 percent in the three days through Jan. 3 when Russia’s exchange was closed.

The rand gained for the first time in five days as technical indicators suggested the currency’s slump to a more than five-year low against the dollar had gone too far.

 

Weak Won

 

South Africa’s currency strengthened 0.5 percent to 10.7050 per dollar in Johannesburg, after weakening to 10.7600 Jan. 3, the least since November 2008.

South Korea’s won reached the lowest level against the dollar since Nov. 14. The Hungarian forint slid 0.2 percent to the least against the euro since Dec. 12. Thailand’s baht dropped 0.4 percent while the Philippine peso weakened for a third day, losing 0.1 percent.

China Railway Group sank 4.1 percent in Hong Kong, the sharpest loss since July 3. The company said its President Bai Zhongren died in an accident and that its chairman will assume Bai’s responsibilities until a new appointment is made. Bai fell from a building Jan. 4, Wang Mengshu, a deputy chief engineer at the builder, said in a phone interview today.

HTC Corp. declined 3.6 percent in Taipei to the lowest level since Oct. 21. Fourth-quarter profit was NT$310 million ($10 million), the company said in a statement yesterday, missing the NT$694 million average of 20 analyst estimates compiled by Bloomberg.

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