Emerging-market stocks slumped for a fourth day, sending the benchmark index to its largest weekly rout in 15 months, as weaker U.S. economic data and Europe’s debt crisis heightened the risk of a global recession. The MSCI Emerging Markets Index sank 3 percent to 1,040.46 at 1:36 p.m. in Singapore, extending this week’s loss to 8.6 percent. South Korea’s Kospi Index (KOSPI) fell 4.3 percent after a 4.8 percent drop in the Standard & Poor’s 500 Index of U.S. equities. All of Asia’s 10 most-used currencies excluding the yen weakened versus the dollar, led by a 0.7 percent slide in Malaysia’s ringgit, and the cost of insuring Asian corporate and sovereign debt from default surged to a one-year high. U.S. reports this week showed services industries expanded in July at the slowest pace since February 2010 and consumer spending fell in June for the first time in almost two years. Employment data today are forecast to show American employers added 85,000 jobs last month, insufficient to reduce the 9.2 percent unemployment rate in the world’s biggest economy. “There seems to be big disappointment that the real economy is not on a recovery path after all the liquidity measures of the past years,” said Chung Yun Sik, chief investment officer for equities at ING Investment Management Korea Ltd., which oversees about $16 billion. That’s ignited a “selling spree,” he said. Faltering growth in the U.S. comes amid worsening fiscal debt crises from Italy to Spain and debates about the threat of a “hard landing” for China’s economy, which trails only the U.S. in terms of size. China Slowdown Manufacturing in China contracted in July for the first time in a year, according to a Markit/HSBC Holdings Plc index released Aug. 1. China raised interest rates three times and lifted banks’ reserve-requirement ratios six times this year to damp inflation. Taiwan, South Korea and Malaysia count China as their largest export market. The Shanghai Composite Index of shares fell 1.8 percent, the most in almost two weeks. Hong Kong’s Hang Seng China Enterprises Index of Chinese companies’ H shares tumbled 4.9 percent, poised for the biggest drop since November 2009. “Negative factors like the European debt crisis and U.S. growth concerns have accumulated and kept adding to investors’ pessimism,” said Tu Jun, a strategist at Shanghai Securities Co. “That has hammered markets worldwide. China’s already weak stock market can’t find shelter from the global rout.” Forecasts Cut Bank of America Merrill Lynch cut its 2011 and 2012 economic growth forecasts for the Philippines and Malaysia, citing weak U.S. data and lower expectations for growth in the U.S., Europe and Japan. Singapore may enter into a “technical recession” this quarter, it said. The MSCI Asia Pacific Index of stocks was headed for an 8.2 percent weekly loss, a rout unmatched since October 2008, when credit markets froze following the bankruptcy of Lehman Brothers Holdings Inc. a month earlier. The gauge has slumped 11 percent from this year’s high reached on May 2, past the level some investors consider a “correction.” MSCI’s emerging market index is down 14 percent since the May 2 high. Taiwan’s benchmark Taiex Index led the slump today, dropping 5.6 percent, the sharpest since November 2008. The island’s national stabilization fund committee is holding a meeting to discuss possible support measures after the losses in the stock market, local Unique TV reported today, without saying where it got the information. Vice Premier Sean Chen, who heads the committee, didn’t return three phone calls made to his office. ‘No Escape’ The Jakarta Composite Index sank 5.1 percent in Indonesia, set for the steepest drop since October 2008. PT Medco Energi Internasional, the nation’s largest oil company, retreated 7.1 percent. That will be its sharpest loss since June 2009. “There’s selling across the board, there’s no escape from the sell off,” said Kenny Soejatman, head of equity investment at Jakarta-based PT Mandiri Manajemen Investasi, which manages about $2.6 billion in assets. The Bloomberg-JPMorgan Asia Dollar Index has declined 0.7 percent this week, the most since November, after Japan and Switzerland weakened their currencies from near record highs, reviving the prospect of currency wars to protect exporters. “Concern about the global economic slowdown and a slump in stocks are making investors risk-averse and weighed on the regional currencies,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp. in Bangkok. “The BOJ intervention raised concern other Asian central banks will follow suit.” Capital Flows South Korea’s won fell 0.7 percent to 1,069.15 versus the greenback. The government will strengthen monitoring of capital flows and the currency, bond and stock markets, the finance ministry said today after an emergency meeting was held to discuss global economic and financial market conditions. The extra yield investors demand to hold dollar bonds issued by developing-nation governments instead of U.S. Treasuries increased 20 basis points yesterday to 3.25 percentage points, the biggest jump since June 2010, according to data compiled by JPMorgan Chase & Co. A basis point is 0.01 percentage point. The cost of insuring Asian corporate and sovereign bonds from default surged to the highest in a year. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 11.5 basis points to 135 basis points as of 12:43 p.m. in Hong Kong, according to Credit Agricole CIB. To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net; Darren Boey at dboey@bloomberg.net

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