BLBG:Emerging Stocks Decline Most in Six Weeks as Currencies Slump
Emerging-market stocks fell the most in six weeks 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 20 percent from its record high three months ago. Thailand’s SET Index (SET) sank 3.2 percent as the nation’s economy entered a recession. The rupiah dropped 2.2 percent against the dollar to the weakest level since 2009, while the Indian rupee and baht lost at least 0.8 percent. OAO Rosneft, Russia’s largest oil producer, dropped 1.3 percent in Moscow after crude retreated for a second day.
The MSCI Emerging Markets Index slid 1.5 percent to 931.03 as of 4:55 p.m. in Hong Kong, poised for the steepest drop since July 3. The measure’s 100-day volatility index rose to a 10-month high. 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 back 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 rollercoaster ride.”
Bond Purchases
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.
The Jakarta Composite Index (JCI) slid 3.5 percent, paring earlier losses of as much as 5.8 percent. The nation’s shares have tumbled at the fastest pace worldwide this quarter amid concern the quickest inflation in four years will spur the central bank to tighten monetary policy further after it raised the benchmark interest rate in June and July. The Jakarta index sank 5.6 percent yesterday as data showed the country had a record current-account deficit last quarter.
Thai Slump
Thailand’s SET Index tumbled to an eight-month low and the baht weakened to the lowest level in a year after Southeast Asia’s second-largest economy entered a recession for the first time since 2009. Advanced Info Service Pcl (ADVANC) sank 4.2 percent and PTT Pcl lost 1.9 percent.
The Shanghai Composite Index slid 0.6 percent as commodity producers declined. Everbright Securities Co. plunged by the 10 percent daily limit as it resumed trading. The China Securities Regulatory Commission banned Everbright from proprietary trading for three months after 23.4 billion yuan ($3.8 billion) of erroneous buy orders on Aug. 16. Everbright also said yesterday it mispriced 10 million yuan of government bonds.
The Hang Seng China Enterprises Index (HSCEI) dropped 2.9 percent in Hong Kong, its biggest loss in six weeks.
Rupee Weakens
India’s S&P BSE Sensex Index decreased 0.9 percent, paring earlier declines of as much as 1.8 percent. The rupee plummeted past 64 per dollar for the first time. JPMorgan Chase & Co. cut the nation’s stocks to neutral from overweight and said shares will continue to underperform if the rupee slides further.
Gauges in Poland and Russia fell more than 1 percent. Rosneft dropped 1.2 percent, heading for the lowest close since June 28. Oil declined 0.9 percent. Harmony Gold Mining Co. decreased 2.7 percent in Johannesburg as gold slumped for a second day.
The FTSE Bursa Malaysia KLCI Index lost 1.9 percent and South Korea’s Kospi index declined 1.6 percent. Trading volumes for the KLCI were 125 percent above the 30-day average and 89 percent higher for the Sensex, data compiled by Bloomberg show.
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
