BLBG:Emerging Stocks Decline to Five-Week Low as Currencies Slump
Emerging-market stocks fell to a five-week low as Indonesian shares extended a slump and currencies from Thailand to India weakened on concern capital outflows will accelerate.
Indonesian equities plummeted for a fourth day, sending the benchmark index down as much as 20 percent from its record high three months ago. Thailand’s SET Index sank 2.7 percent as the nation’s economy entered a recession. Everbright Securities Co. plunged in Shanghai as its shares traded for the first time since erroneous buy orders roiled Chinese shares on Aug. 16. The rupiah dropped 2 percent against the dollar, the weakest since 2009, while the rupee and Thai baht lost at least 0.8 percent.
The MSCI Emerging Markets Index slid 1.2 percent to 933.45 as of 12:41 p.m. in Hong Kong, its fourth day of declines. Investors withdrew $8.4 billion from developing-nation exchange-traded funds this year on signs economies are weakening and as the prospect of reduced U.S. monetary stimulus curbs demand for assets in the region. Some investors expect the Federal Reserve, which publishes minutes of its July meeting tomorrow, will start cutting bond purchases in September.
“The weakness in currencies and stocks are manifestations of funds flowing out of emerging markets backed to developed economies,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “This outflow of funds will gain more momentum as the U.S. moves closer to signal the start of tapering its stimulus. As the flood of liquidity is reduced emerging-markets will be in for a roller coaster ride.”
The Fed is expected to cut bond purchases next month, according to 65 percent of economists in a Bloomberg survey from Aug. 9-13.
All 10 industry groups in MSCI’s developing-nation index fell, led by health-care and consumer discretionary companies. The broad measure has lost 12 percent this year, compared with a 13 percent increase in the MSCI World Index of developed-nation shares. The developing-nation index trades at 9.9 times projected 12-month earnings, lower than the MSCI World’s 14 times, according to data compiled by Bloomberg.
To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net
To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net
