Oct. 31 (Bloomberg) -- Emerging-market stocks dropped, trimming the first back-to-back monthly gain since January, amid concern corporate earnings will falter. The Kospi Index slumped as Korean Air Lines Co. plunged the most in two years.
The MSCI Emerging Markets Index declined 0.9 percent to 1,033.02 at 10:19 a.m. in New York, paring its October advance to 4.6 percent. South Korea’s biggest carrier slid 11 percent on concern it may provide further funding to its affiliate Hanjin Shipping Co. Brazilian plane builder Embraer SA sank 4.1 percent, while China Minsheng Banking Corp. drove the Shanghai Composite Index lower after earnings missed estimates. Malaysia’s ringgit posted its best month since January 2012.
Almost 60 percent of the companies that reported quarterly results in the gauge for developing nations missed analysts’ earnings projections, according to data compiled by Bloomberg. Economists at Citigroup Inc. and Barclays Plc said yesterday’s Federal Reserve policy statement opens the possibility of reduced bond purchases as soon as December. Economists surveyed by Bloomberg Oct. 17-18 had predicted the U.S. central bank would begin paring economic stimulus in March.
“EM is following the soft close in the U.S. yesterday, which was due to the Fed sounding less dovish than what the market was expecting,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP in London, said by e-mail. “The concern is that growth is not looking that robust and the Fed may still taper in December, which would be bad for EM from a flows perspective.”
All 10 groups in the MSCI Emerging Markets Index retreated today, led by health-care and industrial shares. The broad measure trades at 10.5 times projected earnings, compared with the valuation of 14.3 for the MSCI World Index.
The iShares MSCI Emerging Markets Index exchange-traded fund declined 0.3 percent to $42.78. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, increased 0.1 percent to 21.62.
The premium investors demand to own emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage point, to 311 basis points, according to JPMorgan Chase & Co.
--Editors: Rita Nazareth, Daliah Merzaban