Emerging-Market Stocks Fall on China as Ukraine Chaos Spurs Rout

Feb 20, 2014 4:44 pm ET

Feb. 20 (Bloomberg) -- Emerging-market stocks fell the most in two weeks as a decline in Chinese manufacturing bolstered concern the global economy will falter while deadly anti- government protests in Ukraine roiled developing Europe.

The MSCI Emerging Markets Index dropped 0.9 percent to 950.62. The Shanghai Composite Index retreated from a two-month high as Citic Securities Co. drove a rout in financial shares. Benchmark equity gauges from Hungary to Poland and Russia slumped, while India’s S&P BSE Sensex ended a four-day rally. Thailand’s baht posted the biggest three-day decline in six weeks amid escalating political tensions, while Brazil’s real rose the most among 31 major currencies tracked by Bloomberg.

Equities retreated after data showing Chinese manufacturing fell to the lowest level in seven months added to challenges for Communist Party officials grappling with risks to the financial system. The death toll grew in Ukraine as a new wave of deadly clashes in Kiev destroyed a truce declared last night by President Viktor Yanukovych and the opposition. While the Health Ministry reported seven killed, including two policemen, the opposition Svoboda party said more than 60 were dead.

“It’s difficult to find a ray of light to improve sentiment toward emerging markets,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $367 billion, said in a telephone interview today. “China is such a large component of the emerging markets that when it sniffles, the rest of the emerging-market complex catches a cold.”

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund added 0.4 percent to $39.16. Sixteen out of the 24 developing-nation currencies tracked by Bloomberg fell, led by South Korea’s won. The premium investors demand to own emerging- market debt over U.S. Treasuries fell 0.04 percentage point to 336 basis points, according to JPMorgan Chase & Co.

Brazil’s Ibovespa erased losses as Banco do Brasil SA climbed after the nation’s Supreme Court said it may consider delaying a ruling on a $63 billion lawsuit filed against lenders. The real climbed 1 percent as the government reduced spending to meet a budget target.

Russian stocks fell for a third day as Polymetal International Plc slumped. Ukrainian bonds rebounded from a record as pressure mounts on President Viktor Yanukovych to find a resolution to end violence. Stock gauges in Poland and Hungary dropped at least 0.9 percent.

China’s stocks slumped as disappointing economic data overshadowed China Petroleum & Chemical Corp.’s plan to open a unit to private investors. India’s S&P BSE Sensex tumbled as Tata Steel Ltd. slid to a two-week low. The baht extended a three-day decline to 1 percent on concern escalating political tensions will hurt growth.

--Editors: Rita Nazareth, Zahra Hankir