Emerging stocks fell for a second day as signs of slowing economic growth and the political stalemate on the U.S. debt limit further eroded investor confidence. The MSCI Emerging Markets Index dropped 0.3 percent to 1,145.40 at 4:38 p.m. in New York, led by a 1.3 percent slump in MSCI’s gauge of developing-nation technology shares. Hungary’s BUX Index fell for the fifth day, the longest losing streak in two months. Sixteen out of 25 emerging-market currencies tracked by Bloomberg slid versus the dollar, led by the South African rand and Brazil’s real. Asian exporters including Taiwan’s HTC Corp. (2498) and South Korea’s Samsung Electronics Co. sank as the U.S. Federal Reserve said the economy is growing at a slower pace and lawmakers continued to wrangle over the debt ceiling with less than a week before a potential default on Aug. 2. “The U.S. debt issue has everybody feeling a little uncomfortable and investors are playing a bit cautious right now,” said Vetri Subramaniam, the Mumbai-based head of equities at Religare Asset Management Co., which manages $2.57 billion. China’s Shanghai Composite Index lost 0.5 percent, India’s Bombay Stock Exchange Sensitive Index fell 1.2 percent, South Korea’s Kospi Index (KOSPI) slid 0.8 percent and the Jakarta Composite Index (JCI) fell 0.7 percent. Brazilian stocks rose for the first day in four as the central bank said the outlook for inflation has improved and consumer prices fell for the second straight month. Market Volatility The Brazilian real fell 0.7 percent to 1.5672 per dollar, extending its two-day loss to 1.8 percent, the biggest since May. The currency plunged 1.1 percent yesterday to 1.5555 after the government said it will levy a 1 percent tax on some net short dollar positions by investors in the country’s futures market. Policy makers may increase the tax up to 25 percent if needed, according to the decree signed by President Dilma Rousseff. Asian economies face the risk of increased financial market volatility and destabilizing capital flows, the Asian Development Bank said in a report today, adding that its forecast of 7.9 percent growth for emerging East Asian economies this year may be revised lower. The MSCI emerging market gauge has lost 0.5 percent in 2011 as central banks including China and India raised interest rates, while the MSCI World (MXWO) Index of developed-nation shares has gained 2.5 percent. MSCI’s developing nation index trades at 10.2 times estimated earnings, compared with a multiple of 11.7 times for the MSCI World index, according to data compiled by Bloomberg. Debt Ceiling House Speaker John Boehner delayed today’s planned vote on debt-limit legislation as Senate leaders stood ready to kill the measure should it get to their chamber. Senate Majority Leader Harry Reid said earlier he would move tonight to kill Boehner’s debt-ceiling plan, paving the way for Senate votes this weekend on a possible compromise to avert a potential U.S. default. Bankers including Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd Blankfein and JPMorgan Chase & Co. chief Jamie Dimon called on President Barack Obama and Congress to raise the federal debt limit to steer the government away from the threat of default. Stocks in Latin American countries gained after improved reports on U.S. jobless claims and home sales, bolstering confidence in the economy and diverting attention away from the country’s budget impasse. Mexico’s IPC Index rose 0.9 percent, the most in a month. BM&FBovespa SA, the operator of Latin America’s biggest securities exchange, declined 1.6 percent after Goldman pulled its “buy” rating on the stock on concern the new government tax on derivatives will erode trading. Turkey’s lira gained 1.1 percent to 1.6731 per dollar, strengthening the most in a month, after central bank chief Erdem Basci indicated he’s ready to take steps to halt the currency’s retreat. To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; Belinda Cao in New York at lcao4@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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