Emerging markets retreat

Published Nov 30, 2015

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Jakarta - Emerging-market stocks dropped to a two-week low and a gauge of developing-nation currencies slid toward a record following a selloff in Chinese equities.

All 10 industry gauges on the MSCI Emerging Markets Index fell after a regulatory probe into some of China’s largest brokerages sparked the steepest slump in Shanghai shares in three months on Friday. Indonesia’s rupiah, South Korea’s won and Russia’s ruble led declines in emerging currencies, weakening for a fourth day. The offshore yuan rebounded from an early loss on suspected central bank intervention before an International Monetary Fund vote Monday on whether to add China’s currency to its reserves basket.

Samsung Electronics was the biggest drag on the equities benchmark, which headed for its worst month since August. The Kospi index fell the most since September after a report showed South Korea’s October industrial production missed estimates. China’s stocks erased steep losses in the last hour of trading, led by financial companies, as a second day of wild price swings tested the government’s plan to trim support for the equity market.

“Concerns over slowing growth in China and some parts of the global economy still persist and may last through the first half of 2016,” said Agus Yanuar, president director at PT Samual Asset Manajemen in Jakarta. “Investors should maintain defensive positions until we can see some improvements in leading indicators.”

Stocks

The MSCI Emerging fell 0.9 percent to 818.88 as of 4:48 p.m. in Hong Kong and has dropped 3.4 percent in November and more than 14 percent in 2015. The gauge is valued at 11 times of its 12-month estimated earnings, according to data compiled by Bloomberg. That compares with this year’s 0.7 percent retreat in the MSCI World Index, which was traded at 16 times. Kumba Iron Ore dropped 5.5 percent in Johannesburg, leading declines among material stocks.

Samsung Electronics fell 3.2 percent. The company’s Vice Chairman Lee Jae Yong is unlikely to be promoted to chairman, Chosun Ilbo newspaper reported, citing an unidentified Samsung official. The Shanghai Composite Index climbed 0.3 percent, erasing a loss of as much as 3.2 percent, as a gauge of volatility traded near its highest level in two months. Bank of China jumped the most in three months to pace gains for lenders, while Haitong Securities Co. fell 8.9 percent after saying on Sunday it was being probed by China Securities Regulatory Commission for alleged margin-financing violations..

The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong fell 0.7 percent. South Korea’s Kospi index retreated 1.8 percent and Taiwan’s Taiex Index dropped 0.9 percent. The Jakarta Composite Index weakened 0.9 percent and the FTSE Bursa Malaysia dropped 0.6 percent.

Dubai’s DFM General Index retreated 0.5 percent as crude oil headed for its largest monthly drop since July after Iran signaled the Organisation of Petroleum Exporting Countries won’t reduce its production target at a meeting this week. Russia’s Micex Index fell 0.1 percent while the ruble retreated 0.3 percent. Equities gauge in Turkey rose 0.7 percent and the Lira strengthened 0.4 percent as the government said the nation’s trade deficit narrowed in October.

Currencies

The gauge of developing-nation currencies fell toward an all-time low reached in late September as demand for the dollar strengthened on speculation Europe will expand its stimulus this week, deepening a divergence from the US, which is poised to raise interest rates next month. The probability the Federal Reserve will increase its benchmark rate by its December meeting is 74 percent, according to futures data compiled by Bloomberg. The Bloomberg Dollar Spot Index traded at its highest in data going back to December 2004.

"Market players tend to prefer dollars over rupiah or other Asian currencies as they seek a safe-haven currency ahead of the last Fed meeting of the year," said Trian Fatria, a treasury research analyst at PT Bank Negara Indonesia in Jakarta.

Indonesia’s rupiah dropped 0.5 percent and touched a seven- week low, the won declined 0.4 percent and Malaysia’s ringgit fell 0.1 percent. The offshore yuan, which is freely traded in Hong Kong surged to a 0.4 percent advance against the greenback after declining as much as 0.2 percent. This came after the discount to the onshore price widened to the most since early September, hampering China’s efforts to fulfill the IMF’s desire for one rate at home and abroad. The onshore rate in Shanghai, fell 0.05 percent to 6.3981 a dollar, China Foreign Exchange Trade System prices show.

--With assistance from Yudith Ho.

BLOOMBERG

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