Emerging-market stocks fell from a 16-month high as Russia slid the most since April and energy producers tumbled after the U.S. imposed new sanctions on the companies. The ruble headed for the biggest drop in four months.
OAO Sberbank and OAO Rosneft sank at least 3.2 percent in Moscow as the Micex Index retreated for the fourth day. The ruble weakened 1.5 percent versus the dollar, while Ukrainian bonds fell. Stock markets in Hungary, the Czech Republic and South Africa each decreased by more than 0.6 percent. Taiwan Semiconductor Manufacturing Co. lost the most in a year.
The MSCI Emerging Markets Index declined 0.5 percent to 1,061.94 at 2:03 p.m. in London, ending a three-day gain that sent valuations to the most expensive since April 2011. The U.S. and the European Union imposed the most aggressive sanctions to date on Russian businesses and said more may follow, acting after weeks of threats to squeeze the $2 trillion economy over the confrontation in Ukraine.
The sanctions “are negative on EM as oil prices get a boost, but EM equity investors don’t benefit from that rise as Russian stocks fall,” Martial Godet, the head of emerging- market equity and derivatives strategy at BNP Paribas SA in Paris, said by e-mail. “It also fuels the risks of further escalation and indicates the Ukraine story is far from over.”
Today’s decline trims the emerging-market measure’s advance this year to 5.9 percent. The gauge trades at 11.1 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index is up 5.3 percent in 2014 and is valued at a multiple of 15.1.
The Micex tumbled 2.9 percent, poised for the longest losing streak since April 25. The ruble dropped the most since March 3 against the dollar on a closing basis.
Sberbank headed for the lowest level since May 16, while Rosneft, Russia’s largest oil company, plunged 4.6 percent and natural gas producer OAO Novatek slumped 7.1 percent.
OAO Gazprombank, the country’s third-largest lender, Rosneft and Novatek are among companies that face penalties.
The latest attempt by America and the EU to squeeze Russia by limiting access to financing will probably push the economy into a recession, according to Riedel Research Group Inc.