Emerging Stocks Decline on Korea Growth, Europe Debt Concerns - Bloomberg

Emerging-market stocks fell for the first time in four days after the Bank of Korea cut its economic growth estimate and as concern deepened Europe’s debt crisis is worsening.

The MSCI Emerging Markets Index dropped 0.5 percent to 1,020.82 as of 11:04 a.m. in London. Hungarian stocks declined 0.4 percent as life insurer CIG Pannonia Eletbiztosito Nyrt fell 1 percent. Globe Trade Centre SA (GTC), the Poland’s second-largest property developer by market value, jumped to almost a one-month high, lifting the country’s main stock gauge. South Korea’s Kospi Index (KOSPI) slid 0.8 percent. The Dubai Financial Market General Index (DFMGI) retreated 1.7 percent, on course for the biggest decline since March 29.

Yield on Spain’s 10-year notes climbed to 6 percent on April 13, nearing the 7 percent level that pushed Greece, Ireland and Portugal into rescues. South Korea will expand 3.5 percent in 2012, compared with 3.7 percent estimated in December, the country’s central bank said today. China said April 13 growth moderated to 8.1 percent in the first quarter, the least in almost three years.

“Euro fears are stalking markets once again, sapping risk appetite,” Nomvuyo Guma, a strategist at Standard Bank Group Ltd. in Johannesburg, said in e-mailed comments. “Currently, Spanish bond yields, which have spiked close to the 6 percent level widely considered to be dangerous, are the main cause for concern, although rising Italian bond yields and last week’s disappointing China GDP growth also did little for risk appetite.”

Credit-Default Swaps

Five-year credit-default swaps on Spain surged to a record 502.5 basis points as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to ask for a bailout. Spain is scheduled to sell bonds tomorrow and April 19.

The MSCI Emerging Markets Index (MXEF) climbed 11 percent this year, beating the 7.1 percent advance in the MSCI World Index of developed nations. The gauge of developing nations is valued at 10.5 times estimated profit, compared with the MSCI World’s multiple of 12.4 times.

Hungary’s forint led a depreciation in emerging-market currencies versus the euro, weakening as much as 0.8 percent to 229.86. The nation’s BUX Index slumped to its lowest in more than three months, a fifth day of losses. Globe Trade Centre SA jumped 4.8 percent after its biggest financial shareholder proposed to halve its share issue plan.

Contagian Risks

“The situation in Europe is indeed once again the major risk for global markets, and seems to have prevailed this morning over the positive signal which we received from China over the weekend with the announcement of the widening of the Chinese yuan band,” Societe Generale SA analysts led by London- based Benoit Anne, chief emerging-market said in e-mailed comments. “Europe Middle East and Africa is particularly exposed to higher contagion risks in the eurozone, especially vulnerable countries such as Hungary.”

Russia’s main gauge declined 0.2 percent. Turkey’s National 100 Index fell 0.6 percent, led by a 3 percent slide in Celebi Hava Servisi AS (CLEBI), an airport ground services operator, after full-year profit plunged 60 percent, missing all 10 estimates compiled by Bloomberg.

South Africa’s FTSE/JSE Africa All Share Index (JALSH) rose 0.1 percent as paper producers Mondi Ltd. (MND) and Sappi Ltd. (SAP) jumped 1.6 percent and 2.1 percent, respectively. Poland’s WIG20 Index added less than 0.1 percent.

Chinese Currency

China’s Shanghai Composite Index fell less than 0.1 percent. The People’s Bank of China on April 14 expanded the range the managed yuan is allowed to trade within against the dollar for the first time since 2007. The band was widened to 1 percent from 0.5 percent and takes effect today. The currency weakened against the dollar by 0.2 percent to 6.3153.

“There seems to be a conviction among policy makers that the current level of the yuan is at an equilibrium, that the path of multi-year appreciation has either come to a stop or is slowing down,” Amer Bisat, a money manager at hedge fund Traxis Partners LP in New York and former senior economist at the International Monetary Fund, said in an interview. “The currency is probably fairly valued.”

China Southern Airlines Co. and China Eastern Airlines Corp. dropped in Hong Kong as the yuan depreciated, boosting the value of dollar-denominated loans.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 361, according to JPMorgan Chase & Co.’s EMBI Global Index.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps rose one basis point to 288, according to data provider CMA.

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net. Stephen Gunnion at +27- sgunnion@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net