Emerging Stocks Fall for Third Day on U.S., Europe Debt Concerns

Friday, 29 Jul 2011 06:49 AM

 

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July 29 (Bloomberg) -- Emerging-market stocks fell for a third day, extending the benchmark index’s weekly loss, as companies reported weaker earnings and amid concern the U.S. and Europe will struggle to contain their debt crises.

The MSCI Emerging Markets Index decreased 0.9 percent to 1,134.94 at 3:04 p.m. in Manila, taking this week’s retreat to 1.6 percent. The gauge has slid 1 percent this month, its third consecutive loss. Taiwan’s Taiex Index sank 1.4 percent, the steepest decline in 2 1/2 weeks, and South Korea’s Kospi Index dropped 1.1 percent.

Powertech Technology Inc. slumped the most since December 2008 in Taipei while Taiwan Semiconductor Manufacturing Co. fell after reporting lower profit. U.S. House Republican leaders scrapped a vote on Speaker John Boehner’s debt ceiling bill amid a vow by Senate Democrats to defeat the measure. Moody’s Investors Service said it may cut Spain’s Aa2 credit rating as funding pressures mount.

“Investors are taking a defensive stance amidst the uncertainty created by the deadlock over the U.S. debt limit,” said Paul Joseph Garcia, who helps manage $15 billion at Manila- based Bank of the Philippine Islands. “The earnings coming out also show that they may still be headwinds ahead. Still, we think this is a good opportunity to come in.”

The MSCI Emerging Markets Index has lost 1.4 percent this year, trailing a 2 percent gain in the MSCI World Index of developed markets. Stocks in the index for developing equities are valued at 10.9 times estimated profit, less than the multiple of 12.5 times for developed countries.

Technology Earnings

Powertech sank 7 percent after the company said second- quarter profit fell to NT$1.87 billion ($65 million) from NT$2 billion a year ago. Taiwan Semiconductor, the world’s largest contract manufacturer of chips, declined 1.4 percent after posting its first profit decline in almost two years and forecasting sales that missed analysts estimates.

LG Electronics Inc. declined 1.4 percent and Hyundai Motor Co. sank 1.7 percent in Seoul, pacing losses among exporters. Republicans are considering a rewrite of Boehner’s bill for the second time this week after meetings with recalcitrant lawmakers failed to yield the votes to push it through the house. The U.S. has until Aug. 2 to raise the $14.3 trillion debt ceiling to avert a default.

Funds invested in emerging-market stocks attracted a “negligible” $266 million inflow in the week ended July 27, Citigroup analysts led by Markus Rosgen said in a report today, citing figures compiled by EPFR Global. This compares with a withdrawal of $1.1 billion in the week ended July 20.

‘Cautious’ Investors

“Flows were negligible in a trendless market,” Kelly Kwok, one of the analysts in the Citigroup report, wrote in an e-mail. “Investors remain cautious.”

More than two shares fell for each one that gained on China’s Shanghai Composite Index, which slid 0.3 percent. China Railway Construction Corp., builder of more than half of the nation’s rail links since 1949, slid 1.5 percent after the 21st Century Business Herald said debt levels were forcing the railway ministry to withdraw from regional rail investments.

CSR Corp., which made one of the trains involved in the fatal July 23 train crash, fell 1.9 percent while China CNR Corp., the nation’s second-biggest train maker, dropped 1.9 percent. The railway ministry had a debt-to-equity ratio of 58.24 percent as of the first quarter of the year, compared with 46 percent in 2008, the 21st Century Business Herald reported, citing unidentified people.

--Editors: Shiyin Chen, Richard Frost

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

© Copyright 2014 Bloomberg News. All rights reserved.

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