Tags: emerging | markets | stock | growth

Emerging-Market Stocks Fall on Growth Concerns

Monday, 22 August 2011 07:33 PM

Emerging-market stocks fell Monday, sending the benchmark index down for a third consecutive session, as speculation of further monetary stimulus failed to offset concern that global economic expansion is faltering.

The MSCI Emerging Markets Index fell 0.4 percent to 966.06 at 4:30 p.m. in New York. South Korea’s Kospi Index tumbled 2 percent, while China’s Shanghai Composite Index slipped 0.7 percent. Poland’s WIG20 Index added 2.3 percent and Hungary’s BUX jumped 1.8 percent. Brazil’s Bovespa was little changed.

Central bankers will meet in Jackson Hole, Wyoming, this week amid speculation that U.S. Federal Reserve Chairman Ben S. Bernanke may signal a third round of asset purchases to boost the world’s largest economy. A report today showed Thailand’s economic expansion unexpectedly slowed last quarter. Global stock markets are “bouncing along the bottom” after losing almost $7 trillion of market value this month, said Mark Mobius, who oversees about $50 billion at Templeton Asset Management.

“There’s more fear and uncertainty out there,” said Mike Raz, who helps manage about $1.5 billion at Manila-based Rizal Commercial Banking Corp. “Recovery at a global scale will not be possible if the U.S. economy stays weak and the European debt crisis isn’t contained.”

Valuations Fall

The MSCI emerging-market index has retreated 19 percent from this year’s high on May 2 after worse-than-estimated U.S. economic data, the unprecedented downgrade of America’s top debt rating and signs that Europe’s most-indebted countries may struggle to repay obligations shook investor confidence. The gauge is valued at 9.6 times analysts’ estimates for 12-month earnings, compared with 11.6 times at the start of the year, according to data compiled by Bloomberg.

Emerging-market currencies were mixed. Hungary’s forint weakened 0.4 percent against the dollar, while the Russian ruble depreciated 0.3 percent. Brazil’s real weakened 0.5 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries slipped four basis points, or 0.04 percentage point, to 367, the lowest level in three days, according to JPMorgan Chase & Co.’s EMBI Global Index. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa climbed three basis points to 251, according to CMA in London.

The Fed hasn’t given up supporting the economy by buying more Treasuries, said Mobius, executive chairman of Templeton Asset’s emerging markets group. The firm is buying commodity stocks, expecting raw material prices to rise, he said.

Inflation Protection

“At this point, I do think we’re bouncing along the bottom,” Mobius said in a telephone interview with Bloomberg Television today. “For us in equities, it’s particularly good because people will eventually realize that to beat inflation that’s coming as a result of this higher money supply, we’re going to have to be into equities.”

The Bovespa fell less than 0.1 percent to 52,440.23, bringing the three-day decline to 4.8 percent. Lenders including Itau Unibanco Holding SA dropped, with the MSCI Brazil/Financials Index extending a fourth weekly decline, as European financial stocks tumbled after German Chancellor Angela Merkel rejected a common euro-area bond, stoking concern the region’s deficit crisis will worsen.

Consumer prices in Brazil will rise 5.20 percent next year, according to the median forecast in an Aug. 19 central bank survey of about 100 economists published today.

The UBS Bloomberg CMCI Index of 27 raw materials climbed 0.2 percent, extending its biggest weekly gain since the five days ended July 22.

Vale SA, the biggest exporter of iron ore, gained 0.5 percent to 37.51 reais.

China Rate

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, slid 1.2 percent in Hong Kong after China’s money-market rate climbed to its highest level in almost three weeks and a Chinese state economist said it’s too early to loosen monetary policies. China’s seven-day repurchase rate, a gauge of funding availability in the financial system, rose to 5 percent today, the highest level since Aug. 1.

“Investors have become sensitive to negative news and numb to good news,” said Tu Jun, a strategist at Shanghai Securities Co. “The market is still bearish amid tight liquidity and concern over the global economic slowdown has added to the bearish sentiment.”

The Kospi rounded off a three-day, 9.6 percent slump in South Korea. The economy is facing increasing risks to growth and inflation because of the global market turmoil, Finance Minister Bahk Jae Wan said. Hyundai Motor Co., which generated more than half its 2010 revenue outside South Korea, decreased 5.3 percent.

Thailand’s SET Index dropped 0.1 percent and the baht weakened 0.1 percent against the dollar. Gross domestic product rose 2.6 percent in the three months through June from a year earlier, after climbing a revised 3.2 percent in the previous quarter, the National Economic and Social Development Board said in Bangkok today. The median of 13 estimates in a Bloomberg News survey was for a 3.6 percent gain.

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Emerging-market stocks fell Monday, sending the benchmark index down for a third consecutive session, as speculation of further monetary stimulus failed to offset concern that global economic expansion is faltering.The MSCI Emerging Markets Index fell 0.4 percent to 966.06...
Monday, 22 August 2011 07:33 PM
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