Emerging-market stocks fell, dragging the benchmark index to a three-month low, amid concern increased efforts to cool inflation in India and China will curb economic growth amid a worsening debt crisis in Europe. The MSCI Emerging Markets Index dropped 1.6 percent to 1,109.98 at 3:38 p.m. in Singapore, set for its lowest close since March 18. China’s Shanghai Composite Index lost 1.5 percent, the South Korea’s Kospi Index (KOSPI) slid 1.9 percent and Taiwan’s Taiex Index slumped 2 percent. Vietnam’s VN Index gained 0.8 percent following a three-day retreat. India lifted interest rates today for the 10th time since the start of 2010, extending the longest streak of monetary tightening in a decade after inflation accelerated. A rate increase in China isn’t “far away,” the Economic Information Daily said in an front-page editorial. European officials have so far failed to agree on a rescue plan for debt-ridden Greece, where Prime Minister George Papandreou will reshuffle his Cabinet and seek a confidence vote today. “The concern is inflation and some of the hardest hit are the fast-growing economies, where governments are walking a fine line between growth and social obligations,” said Lye Thim Loong, who helps manage about $770 million at Avenue Invest Bhd. in Kuala Lumpur. “Cheap money for funding businesses will eventually dry up.” The MSCI gauge of emerging markets has fallen 3.6 percent this year, compared with a 0.6 percent slide in the MSCI World Index, a measure for developed markets. Stocks in the benchmark index for developing equities are valued at 10.8 times estimated earnings, less than the multiple of 12.3 times for developed shares. Samsung, HTC Technology companies and industrial stocks led declines on the MSCI gauge, with Samsung Electronics Co., which gets most of its revenue overseas, losing 2 percent and Hyundai Heavy Industries Co., the world’s biggest shipbuilder, slumping 4.3 percent. Lotte Shopping Co. sank 7.2 percent amid plans by the South Korean department-store owner to sell convertible bonds. HTC Corp. (2498), Asia’s second-largest smartphone maker, dropped 6.8 percent in Taipei, taking its retreat this week to 14 percent. The company was removed from UBS AG’s list of preferred technology stocks, according to a report dated yesterday. The Bombay Stock Exchange Sensitive Index, or Sensex, slid 0.5 percent after the Reserve Bank of India increased the repurchase rate to 7.50 percent from 7.25 percent. Nineteen of 20 economists in a Bloomberg News survey predicted the decision, while one expected no change. China’s Rate Speculation The Shanghai Composite fell to the lowest close since Sept. 30 on speculation the central bank will step up measures to control inflation. An interest-rate increase isn’t “far away” because not doing so would cause more harm to the economy, the Economic Information Daily said. Bank of China Ltd. (601988) sank 0.6 percent. Poly Real Estate Group Co. slipped 2.5 percent, leading real-estate companies lower after the 21st Century Business Herald said developers may cut home prices next quarter. “As inflation is still running at a high level, speculation over another interest-rate increase is still dominating the market,” said Liu Jianwei, a Shenzhen-based fund manager at Bosera Fund Management Co., which oversees more than $17 billion. “Investors are waiting for a clear signal that the government’s monetary policies have reached a turning point.” To contact the reporters on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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