Emerging-market stocks declined, driving the benchmark index toward its biggest drop in three weeks, on concern tightening measures by China and India are slowing the global economic recovery. The MSCI Emerging Markets Index fell 1.9 percent to 934.13 as of 12:42 p.m. in London, set for the biggest retreat since June 7. The Shanghai Composite Index slumped 4.3 percent, the most since May 17, to a 14-month low, while benchmark gauges for Russia, India, Poland, the Czech Republic and South Africa dropped by more than 1 percent. Developing-nation currencies slumped, led by the Hungarian forint and Polish zloty, while the ruble headed to a two-week low against the dollar. The New York-based Conference Board today revised down its April gauge for the outlook of China’s economy to reflect a slower pace of expansion, while Citigroup Inc. said exports face “strong headwinds” in the second half of the year, reducing prospects of a rebound in Chinese equities. Shares fell in India after the central bank’s Deputy Governor K.C. Chakrabarty said yesterday borrowing costs may be increased. “The Chinese report is raising concern again about the sustainability of the global economic recovery,” Gaelle Blanchard, an emerging-market strategist at Societe Generale SA, said by telephone from London. The MSCI gauge has dropped 7.6 percent since March, heading for its first quarterly decline since the three months ended Dec. 31, 2008, as prospects for tighter monetary policy in the world’s largest developing nations and Europe’s sovereign-debt crisis weigh on the outlook for growth. The measure is now valued at 11.3 times this year’s earnings estimates, down from 16.6 on Jan. 1, according to daily data compiled by Bloomberg. China Life In Europe, Poland’s benchmark WIG20 Index was poised for its biggest decline in a month, losing 2.3 percent, while Hungary’s BUX Index dropped 1.7 percent. Russia’s 30-stock Micex Index retreated 2.7 percent, a 2 1/2-week intraday low, as oil fell below $78 a barrel on concern demand from China may slow. Industrial & Commercial Bank of China Ltd., the country’s biggest lender, slipped 3.3 percent for its biggest slump in a month on the Shanghai gauge. OAO Lukoil and Korea Zinc Co. tracked a decline in energy and metal prices. The Bombay Stock Exchange’s benchmark Sensitive Index fell 1.4 percent, while Russia’s Micex index slumped 2.7 percent, the most in more than month. China Life Insurance Co., the nation’s largest insurer, dropped 4.2 percent. Profit Outlook The leading economic indicator for China rose 0.3 percent in April, less than the 1.7 percent gain reported June 15, the Conference Board said. The previous release contained a “calculation error” for total floor space on which construction began, the research group said in a statement. “Pessimism is growing about slowing economic and profit growth,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. Analysts are split on whether the People’s Bank of China will raise interest rates this year from crisis levels after having increased bank reserve requirements, set a lower target for lending and eased the currency’s peg to the dollar, according to a Bloomberg News survey last week. Concern that economic growth may slow in China, the world’s fastest growing major economy, sent both copper and nickel prices down by more than 3 percent. Crude oil declined 2.6 percent to $76.24 a barrel in electronic trading in New York. Lukoil, Russia’s biggest non-state oil company, retreated 1.1 percent while PetroChina Co., the nation’s largest oil explorer, fell 2.1 percent in Hong Kong. Korea Zinc, the world’s second-biggest zinc smelter, lost 2 percent and PT International Nickel Indonesia slid 2.6 percent. Ruble The slump in oil, Russia’s chief export, helped drag the ruble lower by 0.6 percent against the dollar. Bank Rossii First Deputy Chairman Alexei Ulyukayev warned of volatility in the ruble’s exchange rate, saying the recent period when the Russian currency only strengthened is “over.” The International Monetary Fund said a revaluation of the yuan won’t happen “very rapidly.” The Korean won declined 1.2 percent and South Africa’s rand lost 1 percent. ICICI Bank Ltd., India’s second-largest lender, decreased 2.6 percent. Chakrabarty of India’s central bank yesterday told reporters in Mumbai a rate increase may happen “any time,” including before the next monetary policy meeting, scheduled for July 27. The nation’s benchmark wholesale-price inflation index rose 10.2 percent in May and inflation may accelerate after the government on June 25 allowed gasoline and diesel prices to rise, according to Kaushik Basu, chief economic adviser in the Finance Ministry. To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

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