Market Watch | Emerging Stocks Decline for Fourth

LAGOS, Nigeria, Capital Markets in Africa: Emerging-market stocks were set to extend their longest losing streak since August and currencies retreated on concern the pace of global growth remains sluggish.

Shares in China posted their worst run of weekly declines in two years on speculation the government will refrain from adding fresh stimulus, while Hungarian shares fell and the forint slid to the lowest level since March after the economy unexpectedly contracted. South Africa’s rand slid more than 1 percent, the worst performer among major currencies. Russia’s ruble dropped with oil while Brazilian stocks climbed.

An emerging-markets rally that has handed stock investors 16 percent returns since January is faltering as investors pulled $3 billion from equities in Asia and Brazil this month. Worse-than-expected data from the U.S. and China fuelled concerns central banks may be unable to sustain a recovery, while oil pared a weekly advance as investors weigh supply reductions from the America to Nigeria.

“There’s been one driver of this year’s rally in emerging markets and that’s commodities,” said Anders Svendsen, an emerging-markets analyst at Nordea Bank AB in Copenhagen. “We’ve reached a point now where it will be more difficult to get impetus from commodities. Growth numbers from Hungary today are hugely disappointing.”

Stocks
The MSCI Emerging Markets Index fell 1.1 percent to 797.9 as of 2:20 p.m. in London, extending a loss for the week to 0.9 percent. The gauge traded at 11.3 times the projected 12-month earnings of its members, compared with a multiple of 15.7 for the MSCI World Index.

The Shanghai Composite Index slid 0.3 percent on Friday, extending a five-day retreat to 3 percent, a fourth weekly drop. The Hang Seng China Enterprises Index dropped 10 percent from the April high, entering a so-called correction. Chinese data on new loans and aggregate financing released after the market close trailed analyst estimates. Reports on industrial production and retail sales are scheduled for Saturday.

Hungarian equities dropped 1.2 percent in Budapest as a report showed the economy shrank for the first time in four years after a fall in European Union funding. Poland’s WIG20 Index rose ahead of a Moody’s Investors Service review of the country’s A2 rating due Friday. All but one of 21 analysts surveyed by Bloomberg forecast that Moody’s will take negative action.

Brazil’s Ibovespa index fell 0.6 percent, paring a weekly advance to 2.3 percent, the most since the five days ending April 15.

Currencies
The MSCI Emerging Markets Currency Index retreated 1.1 percent on Friday, and was down 0.9 amount for the week. The Bloomberg Dollar Spot Index strengthened for a second week as traders increased expectations for tighter Federal Reserve policy after two regional central bank presidents made cases for an interest-rate increase.

The rand retreated 1 percent, the most among 24 developing-nation exchange rates tracked by Bloomberg.

The Hungarian forint retreated 0.7 percent against the euro, heading for the lowest close since March 29, and is down 1.3 percent for the week. The ruble fell 0.8 percent, cutting a five-day gain to 2 percent, as oil pared a weekly advance, sending currencies of commodity-producing countries such the Mexican peso lower.

Bonds
The extra yield investors demand to own emerging-market debt rather than Treasuries climbed 1 basis point to 395, according to JPMorgan Chase & Co. indexes.

Polish bonds rose for a seventh day, with the yield on 10-year government debt set to decline 9 basis points this week to the lowest since April 21 ahead of the Moody’s credit report. Hungarian bonds retreated this week, with the yield on five-year government notes rising 16 basis points to 2.47 percent.

Turkish bonds fell for the eighth day out of 10, with the yield on 10-year notes rising 11 basis points to 10.05 percent. Yields have climbed more than 80 basis points in the past two weeks as President Recep Tayyip Erdogan tightens his grip on power.

Source: Bloomberg Business News