Emerging stocks fall for sixth day, paring July gain before Fed

SHANGHAI, July 31 — Emerging-market stocks fell for a sixth day as Malaysian shares retreated after Fitch Ratings reduced its credit-rating outlook and the rupee’s plunge spurred concern capital outflows from India will accelerate.

Malayan Banking Bhd. slid to a one-month low and the ringgit weakened the most in three weeks after Fitch cut the nation’s debt outlook to negative from stable. India’s S&P BSE Sensex index lost 0.6 per cent and the rupee sank 0.9 per cent against the dollar. HTC Corp. slumped 6.7 per cent in Taipei after forecasting a drop in sales. China Resources Land Ltd. rose 5.1 per cent in Hong Kong on speculation the Chinese government may loosen property curbs.

The MSCI Emerging Markets Index fell 0.5 per cent to 949.18 as of 1:24 p.m. in Hong Kong. The measure has risen 0.9 per cent this month, the most since January. The gauge has retreated 9.5 per cent since May 22 when the US Federal Reserve first signalled the central bank’s asset-buying program could be cut if the economy showed sustained improvement. Fed Chairman Ben S. Bernanke has said there’s no fixed schedule for tapering stimulus. The Fed concludes a two-day policy meeting today.

“There is the rotation of bonds to equities in developed markets and the problem for emerging countries is there’s rotation out of bonds to developed equities, not their own,” Alan Richardson, a Hong Kong-based money manager at Samsung Asset Management, which oversees more than US$100 billion (RM300 billion) globally, said today. “Negative rating assessments from credit- rating agencies exacerbate the capital outflow.”

US data

The US government may say today that gross domestic product growth slowed last quarter, while employment data are also scheduled this week.

The FTSE Bursa Malaysia KLCI index dropped 1 per cent, the most since June 24, after Fitch said in a statement yesterday that the country’s public finances are its “key rating weakness.”

Trading volumes for the Malaysian benchmark gauge were 119 per cent above the 30-day average, data compiled by Bloomberg show. Malayan Banking, the nation’s largest lender, dropped 2.8 per cent. The ringgit slid 0.6 per cent, the most since July 8.

The Sensex fell for a sixth day, headed for the longest losing streak since March, as the rupee slumped to within 0.1 per cent of a record low. The currency tumbled the most in seven weeks yesterday as the Reserve Bank of India held its benchmark repurchase rate at 7.25 per cent and flagged the potential withdrawal of cash supply measures.

Global investors have pulled US$1.05 billion from domestic equities this month and US$2 billion from bonds, data from India’s market regulator show.

HTC drops

A gauge of technology companies in the MSCI Emerging Markets Index declined 1 per cent, the most among 10 industry groups. HTC, Taiwan’s biggest smartphone maker, sank to the lowest level since November 1, 2005 after forecasting an eighth consecutive decline in quarterly sales. The benchmark Taiex index lost 0.5 per cent.

The Philippine Stock Exchange Index dropped 1.2 per cent, while Thailand’s benchmark stock index’s retreated 1.3 per cent. The Jakarta Composite index lost 0.8 per cent.

The Shanghai Composite Index rose 0.3 per cent, extending a 0.9 per cent advance this month. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong climbed 0.2 per cent.

China Resources Land, the second-biggest mainland developer traded in Hong Kong, jumped the most since July 11. Guangzhou R&F Properties Co. surged 7.6 per cent. China will seek “stable and healthy” development of the property market, the government said on its website after a meeting led by President Xi Jinping yesterday.

First time

Yesterday’s statement on property is the first time this year that the Chinese government didn’t mention further tightening of the market, according to Credit Suisse Group AG and Orient Finance Holdings (HK) Ltd.

Egypt’s EGX 30 Index advanced 12 per cent in July, the biggest gain among 21 emerging-market equity indexes, after the military ousted Islamist President Mohamed Mursi, triggering US$12 billion of aid pledges from Persian Gulf countries and stoking bets the economy will recover once violent clashes subside.

Indonesia’s rupiah weakened about 3.4 per cent this month, leading declines in emerging-markets. The central bank allowed the currency to slide toward levels quoted in offshore markets after foreign-exchange reserves dropped below US$100 billion in June for the first time in more than two years and the country recorded trade deficits in seven of the eight months through May.

The MSCI developing-nations gauge has lost 10 per cent this year, compared with a 13 per cent increase in the MSCI World Index of developed-country stocks. The emerging-markets measure trades at 10 times 12-month projected profit, compared with the MSCI World’s 13.8 times, data compiled by Bloomberg show. — Bloomberg