Emerging-Market Stocks Fall to Five-Month Low as Petrobras Sinks

Feb 05, 2014 6:05 pm ET

Feb. 5 (Bloomberg) -- Emerging-market stocks dropped to a five-month low as Petroleo Brasileiro SA to Samsung Electronics Co. slumped amid concern the global economy will slow down.

The MSCI Emerging Markets Index fell 0.1 percent to 916.56, extending this year’s slide to 8.6 percent. Petrobras retreated to the lowest since 2005 in Sao Paulo, while Samsung slumped for a sixth day. Galaxy Entertainment Group Ltd. and Sands China Ltd. plunged more than 7 percent in Hong Kong as casino companies tumbled on signs of a slowdown in Macau gambling revenue. Brazilian government bond yields extended a drop from a four-year high after the Treasury canceled bond auctions.

Investors watched U.S. data today showing that companies added fewer workers than projected in January, while service industries expanded more than forecast. The improving U.S. economy may warrant faster tapering of quantitative easing, Philadelphia Fed President Charles Plosser said today.

“Investors don’t necessarily dislike EM assets, they just dislike the price, and once the price adjusts they’re willing to buy,” Marshall Gittler, head of global foreign-exchange strategy at IronFX Financial Services Ltd. in Limassol, Cyprus, said in an e-mailed note. “That would change the perception of the recent decline from the beginning of a rout to a simple correction, which is a totally different story.”

The iShares MSCI Emerging Markets Index exchange-traded fund fell 0.4 percent to $37.72. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 0.3 percent to 29.23.

Brazil, Russia

Brazil’s Ibovespa retreated as state-run oil company Petrobras sank 1.9 percent to the lowest level since July 2005. Yields on local bonds maturing in 2017 declined 17 basis points, or 0.17 percentage point, to 12.81 percent at 6:14 p.m. in Sao Paulo after increasing Feb. 3 to 13.14 percent, the highest since January 2010.

Russian stocks climbed for the first time in four days as the ruble’s gain helped lift OAO Sberbank, the nation’s biggest lender, and declines over the last two weeks were seen as overdone. The ruble had its first two-day rally this year as Russian exporting companies took advantage of a plunge to a record to sell foreign currency.

The hryvnia dropped to the lowest in five years as the Ukrainian central bank’s defense of its dollar peg weakened in the absence of external aid to shore up the country’s dwindling currency reserves.

China, India

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong, known as the H-share index, declined 0.4 percent to 9,470.62. China’s markets are closed for holidays until Feb. 7. Galaxy Entertainment slumped 7.3 percent, the steepest drop in more than seven months, and Sands China fell the most since October 2011. MGM China Holdings Ltd. slid 4.3 percent and Wynn Macau dropped 2.9 percent.

Indian stocks climbed, led by metal producers and automakers, after a drop in the benchmark index to a four-month low attracted some investors. Tata Steel Ltd. rebounded 4.8 percent from a three-month low, helping an industry gauge end two days of losses. Mahindra & Mahindra Ltd. added 2.9 percent, sending the S&P BSE India Auto Index to its steepest gain in more than a month.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell seven basis points, or 0.07 percentage point, to 348 basis points, according to JPMorgan Chase & Co.

--Editors: Rita Nazareth, Matthew Brown