Emerging-market stocks fell as Taiwan Semiconductor Manufacturing Co. led technology shares lower and China’s non-manufacturing industry declined. Russian equities dropped as OAO Aeroflot tumbled to the lowest level since March.
Taiwan Semiconductor sank to a two-month low in Taipei. Aeroflot, Russia’s biggest carrier, lost 6% after Vedomosti reported the government is considering European flight restrictions. Russian bonds fell as the nation pulled its third ruble (CME:R6U14) bond sale in a row. Currencies in Malaysia, South Korea and Indonesia gained 0.5%, while the rupee (CME:H3U14) stayed stronger after India’s central bank held interest rates.
The MSCI Emerging Markets Index decreased 0.4% to 1,064.97 at 1:54 p.m. in London. A gauge of technology shares retreated 0.6% after posting its largest gain in 11 months yesterday. China’s service industries stagnated in July, suggesting the government’s stimulus measures are failing to gain traction outside of manufacturing. The Shanghai Composite Index slid from its highest level since December.
Declines in China have been precipitated by services PMI data that “highlights that the economy is not necessarily that robust,” Tony Hann, London-based head of emerging-market equities at Blackfriars Asset Management Ltd., said by e-mail. Taiwan’s Taiex Index, which dropped the most since February today, succumbed to profit taking following a “decent run, particularly in tech,” he said.
Eight of the emerging-market gauge’s 10 industry groups fell today, led by energy, material and technology companies. A Bloomberg gauge tracking 20 developing-nation currencies weakened 0.2% and the premium investors demand to own emerging-market bonds over U.S. Treasuries (CBOT:ZNU14) narrowed one basis point to 280, according to JPMorgan Chase & Co. indexes.
The Micex Index dropped 1.6% in Moscow as volume in Aeroflot jumped to four times the three-month daily average. Russia may limit or ban flights over Siberia by European air carriers bound for Asia, Vedomosti reported, citing people familiar with the situation. Aeroflot, which collects royalties from foreign airlines that cross Siberia, last week grounded its low-cost Dobrolet unit after European Union sanctions were imposed.
The yield on 10-year Russian bonds rose seven basis points to 9.73%, the highest since March 14. The Finance Ministry cited “unfavorable market conditions” for its decision to cancel tomorrow’s local-currency offering. The rate on the 10-year debt has increased 110 basis points since the day before a Malaysian passenger jet crashed in Ukraine on July 17.
Dubai’s DFM General Index declined 0.9% as Emaar Properties PJSC lost 1.6% after second-quarter profit trailed estimates. The Borsa Istanbul 100 Index fell for a fourth day in Istanbul, while markets in Egypt and Qatar climbed at least 1%.
The S&P BSE Sensex Index advanced 0.7% to the highest level since July 30. The rupee gained 0.1% versus the dollar (NYBOT:DXU14). The Reserve Bank of India kept the benchmark repurchase rate at 8% as retail inflation slowed.
South Korea’s won rose for a second day after foreign-exchange reserves climbed to a record. The ringgit appreciated before tomorrow’s data that may show the trade surplus widened in June.
The MSCI Emerging Markets Index has risen 6.2% this year and trades at 11.1 times projected 12-month earnings, data compiled by Bloomberg show. That compares with a multiple of 14.8 for the MSCI World Index, which is up 2.9% in 2014.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 0.7%. Developer Greentown China Holdings Ltd. plunged 12% after saying it expects first-half profit will drop more than 65% from a year earlier. The Shanghai Composite Index lost 0.2% after climbing 1.7% yesterday.
China’s services Purchasing Managers’ Index came in at 50 in July, the lowest since the series began in November 2005 and down from 53.1 in June, according to HSBC Holdings Plc and Markit Economics. A reading above 50 indicates expansion.
The Shanghai Composite Index will probably end its world- beating rally within days and fall about 10%, said Tom DeMark, the developer of market-timing indicators who predicted the gauge’s peak last year. “Selling into strength now is recommended,” DeMark wrote in an e-mailed response to Bloomberg, adding that the losses may occur over six months.
Taiwan Semiconductor slid 3.2%. Smartphone-maker HTC Corp. dropped to a five-month low after its July sales fell 33% from a year ago. The Taiex Index dropped 2%.
“Technology shares have outperformed the broader market with a return that is way above the market, making profit-taking inevitable in the sector,” said Allan Yu, first vice president at Metropolitan Bank & Trust Co., which manages $7.5 billion.