Emerging-Market Stocks Fall as Petrobras Leads Oil Shares Lower

Feb 13, 2014 5:16 pm ET

Feb. 13 (Bloomberg) -- Emerging-market stocks fell for the first time in three days as Petroleo Brasileiro SA drove a rout in energy producers amid concern global growth will falter. Russia’s ruble posted the biggest slide in eight months.

The MSCI Emerging Markets Index dropped 0.8 percent to 945.83. Benchmark equity gauges from Turkey to India and Russia retreated at least 1.1 percent. State-run oil company Petrobras declined 2.3 percent in Sao Paulo, while OAO Gazprom snapped a six-day advance in Moscow. The ruble slid as Russia’s foreign reserves fell to a three-year low. Thailand’s two-year bonds advanced, pushing the yield to the lowest since 2010.

Equities declined after data showed that more Americans than forecast filed applications for unemployment benefits last week, while retail sales in the U.S. decreased in January by the most in 10 months. Nine out of 10 industries in the measure for emerging-market equities retreated, led by energy shares, as West Texas Intermediate crude fell from a four-month high.

“We have been seeing some pressure due to concerns about growth and emerging markets of course have taken a big hit,” Peter Jankovskis, who helps oversee $3.5 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC, said by phone. “It’s still something that’s out there and that people are concerned about.”

The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.1 percent to $39.18. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, decreased 3.7 percent to 24.60.

Fund Outlows

Developing-nation exchange traded funds in the U.S. had about $100 million of outflows since the MSCI Emerging Markets Index reached this year’s low on Feb. 5, while foreigners pulled $892 million from bourses in South Korea, India and Brazil, data compiled by Bloomberg show. BlackRock Inc.’s Larry Fink and Templeton Asset Management’s Mark Mobius are among managers of more than $7.7 trillion who say shares are cheap.

MetLife Inc. Chief Executive Officer Steve Kandarian said the potential for gains in developing nations outweighs the cost of this year’s volatility.

“Recent turmoil in certain emerging markets does not change our view of the long-term attractiveness in our emerging- markets business,” Kandarian said today on a conference call with analysts. “Nothing has changed regarding the key macro drivers of middle-class growth and low levels of insurance penetration.”

Bond Market

While investors are selling emerging-market equities, bonds from these countries are proving a salve. Two weeks after emergency measures by Turkey’s central bank pulled the lira back from a record low, the government sold $1.5 billion of 31-year dollar bonds yesterday in its longest-dated debt in the currency ever. Russia issued 20 billion rubles ($569 million) of notes after back-to-back flops, while Slovenia a day earlier sold dollar-denominated notes.

Brazil’s Ibovespa slid as Petrobras extended this year’s slump to 14 percent. Banco do Brasil SA, the nation’s biggest bank by assets, sank after posting earnings that missed estimates.

Russian stocks fell the most in more than a month as lower oil prices weighed on Gazprom and banks declined after VTB Capital cut its rating on smaller lenders. The ruble dropped 1.3 percent to 41.0154 against the central bank’s basket of dollars and euros by 6 p.m. in Moscow.

Turkey, Poland

The Borsa Istanbul 100 Index slid 1.2 percent as Akbank TAS sank. Benchmark stock gauges in Hungary and the Czech Republic also retreated. Poland failed to sell the maximum offered amount at its local-currency bond auction for the first time in four months as yields on its benchmark 10-year notes climbed.

The Shanghai Composite Index snapped a four-day advance after technology companies slid on speculation a rally has been excessive and coal producers dropped on concern profits will slump as the government takes measures to contain pollution. China Shenhua Energy Co., the nation’s biggest coal producer, lost 1 percent. Yonyou Software Co. plunged 8.1 percent.

India’s benchmark stock index slid to a four-month low after earnings from several of the country’s biggest companies missed estimates. Drugmaker Cipla Ltd. plunged the most in almost five years and Coal India Ltd. fell the most in four weeks after reporting a drop in profits.

Thailand’s two-year bonds advanced on bets the central bank will reduce borrowing costs to support the economy amid prolonged political unrest. Indonesia’s rupiah jumped the most in a month after the current-account deficit almost halved last quarter and the central bank left borrowing costs unchanged.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose four basis points, or 0.04 percentage point, to 338 basis points, according to JPMorgan Chase & Co.

--With assistance from Weiyi Lim in Singapore and Zachary Tracer in New York. Editors: Rita Nazareth, Matthew Brown