Emerging-market stocks fell for a third day on speculation Chinese policy makers may raise interest rates for the second time in two months as early as today to curb inflation. The MSCI Emerging Markets Index fell 1.4 percent to 1,122.53 as of 11:35 a.m. in London. The gauge is on course for a 2.9 percent retreat this week, the most since Aug. 13. China’s Shanghai Composite Index retreated 5.2 percent, the biggest loss since August 2009. The Philippine Stock Exchange Index decreased 1.6 percent to the lowest level in almost two months. Turkey’s National ISE 100 index slid 1.4 percent after the central bank increased the level of lira reserves that banks must deposit to 6 percent from 5.5 percent. Industrial & Commercial Bank of China Ltd. and China Vanke Co. led the nation’s lenders and developers lower after a report yesterday showed consumer prices rose at the fastest pace in two years. “There’s talk of an interest-rate hike over the weekend,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “It’s quite possible given how inflation has accelerated.” ICBC, the world’s largest bank, dropped 1.9 percent in Shanghai. China Vanke fell 5.3 percent in Shenzhen trading. China’s consumer prices increased 4.4 percent from a year earlier, boosted by food costs, a statistics bureau report showed in Beijing yesterday, more than the 4 percent median forecast in a Bloomberg News survey of 28 economists. Property prices rose in October at the slowest pace in 10 months, after the government raised interest rates. Inflation, Policy Risks The People’s Bank of China may raise its benchmark one-year lending rate to 5.81 percent by year-end from 5.56 percent, according to the median forecast of 11 analysts polled after yesterday’s consumer price data. The deposit rate may climb to 2.75 percent from 2.5 percent, the survey showed. Inflation and policy risks will cloud “earnings visibility” at China’s banks in 2011, Alistair Scarff and Michael Li, analysts at Bank of America Merrill Lynch, wrote in a report. “Earnings momentum may decelerate due to lower volume, higher provisions, and potential margin squeeze.” Metals and oil fell. Zinc for three-month delivery retreated 3.9 percent in London after China sold 49,993 tons at auction to cool domestic prices. Crude oil decreased 2.6 percent to $85.57 a barrel in New York after rallying to the highest in two years yesterday. Russia’s Micex stock index slid 0.5 percent. OAO Uralkali, the country’s second-largest potash producer, fell 2.4 percent. Banks led Turkish stocks lower. Akbank TAS, part-owned by Citigroup Inc., lost 2.5 percent. Turkiye Garanti Bankasi, in which Spain’s Banco Bilbao Vizcaya Argentaria SA has agreed to take a 25 percent stake, slid 1.7 percent. Hungary The Korean won depreciated 1.8 percent, its biggest slide since June, to 1,127.84 to the dollar. The ruble lost 0.7 percent to 30.7900. In the Philippines, shares fell for a sixth straight day, bringing the slump to 7.3 percent since Nov. 4. Before that date the index gained 44 percent in 2010. The benchmark will extend losses for the rest of 2010 as investors speculate a recent rally was overdone, Macquarie Group Ltd. said. “Share prices have gone up so much in a short time,” said Alex Pomento, a Manila-based strategist at Macquarie. “We will see a correction from here until the end of the year.” Hungary’s BUX stock index gained 1.7 percent after the statistics office said economic growth picked up to an annual 1.6 percent in the third quarter from 1 percent in the second quarter. The difference between the return investors require from emerging-market bonds and the interest from U.S. Treasuries fell 2 basis point to 2.39 percent, according to the JPMorgan Chase & Co. EMBI+ index. To contact the reporters on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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