Emerging-Market Stocks Fall Most in Month Amid Chinese Slowdown

Apr 15, 2014 5:29 pm ET

April 15 (Bloomberg) -- Emerging-market stocks dropped the most in a month after data showed a decline in Chinese lending and the weakest money-supply expansion on record, adding to concern about a slowdown in the world’s second-largest economy.

The MSCI Emerging Markets Index retreated 1.2 percent to 999.90, the biggest slump since March 12. The Shanghai Composite Index sank 1.4 percent while the one-year interest-rate swap slipped to a month low. Vale SA, which ships half of its ore and pellets to China, drove Brazil’s Ibovespa down. The Micex Index slid the most in five weeks and a debt sale was canceled as talks between U.S. President Barack Obama and Russian President Vladimir Putin failed to end a deadlock over Ukraine.

China’s broadest measure of new credit plunged 19 percent in March from a year earlier and growth in M2 money supply slowed to 12.1 percent from 13.3 percent, the central bank reported today. Gross domestic product probably increased 7.3 percent from a year earlier in the first quarter, the least since the same period of 2009, according to the median estimate of economists surveyed by Bloomberg before data due tomorrow.

“China dominates the sentiment in emerging markets,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees $376 billion, said in a telephone interview. “Fears of a Chinese asset repricing are now reality. It’s bad news for everyone.”

The iShares MSCI Emerging Markets Index ETF dropped 1.5 percent to $41.11. The premium investors demand to own emerging- market debt over U.S. Treasuries rose 0.01 percentage point to 297 basis points, according to JPMorgan Chase & Co.

Vale Plunges

Brazil’s Ibovespa slipped 2.2 percent as commodity shares tumbled amid concern growth in China, the nation’s top trading partner, will slow. Vale, the world’s largest iron-ore producer, sank 4.6 percent.

The Micex Index extended a three-day slide to 4.1 percent in Moscow, led by OAO Sberbank and OAO Gazprom. Russia canceled its second ruble bond auction in a row and sixth in the last seven weeks as yields jumped the most in a week yesterday after protests in eastern Ukraine turned violent.

The hryvnia rallied, stemming the world’s worst selloff this year, after Ukraine’s central bank raised interest rates by the most since 1998.

China’s stocks declined the most in five weeks, led by financial companies and commodity producers. Poly Real Estate Group Co. and Industrial Bank Co. fell more than 3 percent. China Shenhua Energy Co., a unit of the nation’s largest coal producer, slid 2.4 percent, while Sinopec Shanghai Petrochemical Co. lost 1.8 percent. The one-year interest-rate swap dropped as much as eight basis points.

Kenya’s shilling weakened to its lowest level in more than six months as intervention by the East African nation’s central bank failed to stem increased demand for dollars from gasoline and manufacturing companies.