Emerging-Market Stocks Decline as Tencent Leads Technology Rout

Apr 11, 2014 5:42 pm ET

April 11 (Bloomberg) -- Emerging-market stocks dropped the most in three weeks as Tencent Holdings Ltd. led a slump in technology companies from a record. Russia’s Micex Index slid after the U.S. threatened tougher sanctions over Ukraine.

The MSCI Emerging Markets Index declined 0.6 percent to 1,015.44. Tencent, Asia’s biggest Internet company, tumbled 6.7 percent in Hong Kong. The Micex gauge capped the worst week in a month, while the ruble dropped after Russia’s Finance Ministry said it will restart buying foreign currencies. Brazil’s real had a fourth weekly gain on speculation the central bank will control inflation by allowing the currency to advance.

Technology companies in the measure for developing-nation stocks dropped after reaching the highest level since at least 1995, according to data compiled by Bloomberg. The Nasdaq Composite Index declined the most since 2011 yesterday, triggering a selloff in technology stocks across Asia. U.S. Treasury Secretary Jacob J. Lew delivered a warning yesterday of more sanctions in talks with his Russian counterpart, Anton Siluanov, after Russia’s incursion into Ukraine.

“You had some extreme valuations in certain sectors, primarily technology,” Timothy Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, which helps manage about $1.5 billion in assets, said by phone. “The U.S. discussing more sanctions for the Ukraine certainly is a factor too. These geopolitical overhangs could also be influencing markets.”

ETF Declines

The iShares MSCI Emerging Markets Index ETF was unchanged at $41.83. The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.03 percentage point to 295 basis points, according to JPMorgan Chase & Co.

The Ibovespa rebounded from earlier declines as Brazil’s state-controlled oil producer Petroleo Brasileiro SA rallied 3.3 percent. The real climbed 0.8 percent this week.

Russia’s Micex fell as much as 1.6 percent before trading down 0.4 percent, bringing its weekly drop to 1.5 percent. The ruble extended this year’s decline to 7.8 percent.

Chinese stocks dropped, sending mainland companies in Hong Kong to the biggest decline in two months, as technology shares sank on valuation concerns. Tencent posted the largest drop since November 2012. The stock has tumbled 17 percent from its all-time high on March 6.

South Korea’s won completed its biggest weekly gain since December 2011 as an improving outlook for the nation’s economy lured foreign capital. The ringgit fell the most in three weeks on speculation some investors are buying dollars to take advantage of a favorable exchange rate after the Malaysian currency touched a four-month high yesterday.