Emerging Stocks Head for Worst First Quarter Since 2008

March 29, 2013 Leave a comment

Emerging Stocks Head for Worst First Quarter Since 2008

Emerging stocks fell, extending the biggest first-quarter slump since 2008, as China’s banking regulator tightened rules on wealth-management products and the cabinet called for new measures to deregulate interest rates.

China Minsheng Banking Corp. (1988) sank the most since October 2011 in Hong Kong amid concern earnings growth in the financial industry will slow, while Brilliance China Automotive Holdings Ltd. (1114) dropped 11 percent as profit missed analysts’ estimates. OAO Gazprom (GAZP), Russia’s gas export monopoly, slid the most in six weeks, and beef producer Marfrig Alimentos SA led declines in Sao Paulo amid a wider-than-forecast loss.

The MSCI Emerging Markets Index (MXEF) dropped 0.1 percent to 1,031.15 by 12:39 p.m. in New York, extending its quarterly decline to 2.3 percent. China’s regulator told lenders today to limit investments of client funds in credit assets that aren’t publicly traded. Separately, the State Council said yesterday that it will take steps this year to loosen state control over interest rates and the yuan in a bid to sustain growth.

“It’s a potential headwind,” said Walter ‘Bucky’ Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. He spoke in a phone interview. “Any disappointment or anticipation of a slowdown of growth in China is certainly unwelcome in the emerging markets.”

Gains in the U.S. market helped limit losses today as the Standard & Poor’s 500 Index rose above its record closing level. Cypriot lenders opened for the first time in almost two weeks, with new rules curbing access to cash preventing an initial panic to withdraw deposits.

Commodity Shares

Commodity shares in MSCI Emerging Markets Index dropped the most among 10 groups. The broader gauge has slipped 2.3 percent this year, trailing a 7 percent gain in the MSCI World Index of developed-country stocks. The emerging-markets measure trades at 10.9 times 12-month projected profit, compared with the MSCI World’s 14.2, according to data compiled by Bloomberg.

The iShares MSCI Emerging Markets exchange-traded fund, the ETF tracking developing-nation shares, lost 0.4 percent to $42.50. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 0.7 percent to 16.74.

Brazil’s Bovespa was poised for a third monthly drop as lower commodities pushed raw-material producers lower on concern the global recovery will falter. Marfrig (MRFG3) sank 8.4 percent. Sugar-cane processor Cosan SA Industria e Comercio dropped 2.7 percent. Utility Centrais Eletricas Brasileiras SA jumped 17 percent, the most in the emerging-markets gauge after profit beat estimates. Mexico’s market is closed today.

Gazprom Tumbles

Russian shares rose for a second day, sending the Micex Index up 0.6 percent. VTB Group, Russia’s second-largest lender, climbed 3.2 percent after Kommersant reported its management will propose paying 15 percent of net income as dividends for 2012. Gazprom slumped 2.2 percent. The state-run company said late yesterday that 2012 net income dropped 37 percent, based on local accounting standards.

Turkey’s ISE National 100 Index (XU100) rallied 1.3 percent to the highest level since Jan. 24. S&P raised Turkey’s long-term foreign currency credit rating, according to a statement released after the market closed yesterday. GSD Holding (GSDHO) AS, a Turkish company with interests in textiles and banking, surged 22 percent, the most since March 2008.

Benchmark gauges in Poland and Hungary retreated, while Czech stocks advanced for the first time in five days.

The Shanghai Composite Index (SHCOMP) sank 2.8 percent, the most in three weeks, erasing its gain for the quarter. Hong Kong’s Hang Seng China Enterprises Index lost 1.3 percent. China Minsheng plunged 7.9 percent in Hong Kong. Brilliance China Automotive fell the most since 2011 for the biggest decline in the MSCI Emerging Markets Index.

The extra yield investors demand to own developing-nation dollar debt over U.S. Treasuries fell two basis points, or 0.02 percentage point, to 305, according to the JPMorgan Chase & Co. EMBI Global Index.

To contact Bloomberg News staff for this story: Lyubov Pronina in London at lpronina@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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