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Emerging Stocks From Russia to China Trim Fed Rally; Lira Drops
By Ian Sayson & Maria Levitov – Sep 24, 2013 7:53 PM GMT+0700
Emerging-market stocks dropped as Russian shares fell for a third day and Chinese developers declined on concern the government may expand property taxes. Turkey’s lira lost the most among developing-nation currencies.
OAO Gazprom, Russia’s biggest natural-gas producer, slid 1.2 percent on lower energy prices, offsetting a rally in OAO Uralkali after a unit of China’s sovereign wealth fund converted bonds into shares. China Resources Land Ltd. (1109) sank the most since July 3 in Hong Kong. Turkey’s lira dropped 0.7 percent after central bank Governor Erdem Basci said policy makers won’t cut interest rates in the near term. Indonesian equities wiped out almost all gains since last week’s Federal Reserve decision.
The MSCI Emerging Markets Index decreased 0.6 percent to 1,009.94 as of 1:44 p.m. in London, paring this quarter’s increase to 7.4 percent, the most since the three months ended March 2012. Federal Reserve Bank of Kansas City President Esther George and her Cleveland counterpart Sandra Pianalto are due to speak today, after the Fed’s unexpected decision last week to maintain its $85 billion in monthly monetary stimulus spurred developing-nation assets.
“The main concerns are the debt ceiling show down in U.S., and Chinese property taxes are clearly not helping risk sentiment,” Michael Ganske, head of emerging markets at Rogge Global Partners Plc in London, said by e-mail.
The U.S. House of Representatives voted last week to finance the federal government through mid-December and choke off funding for President Barack Obama’s signature health-care law, setting up a showdown with the Senate and the White House. The White House said Obama would veto the House bill and Senate Majority Leader Harry Reid said the bill is “dead on arrival.”
Uralkali Stake
The MSCI gauge’s relative strength index declined to 66.3 today, after closing above the threshold of 70 yesterday that signals to some investors a security is poised to drop.
All 10 industry groups in MSCI’s emerging-markets index fell, led by energy and telecommunications companies. Russia’s Micex Index lost 0.3 percent as Gazprom headed for the lowest close since Sept. 13. West Texas Intermediate crude dropped for a fourth day to the lowest price in more than six weeks amid output gains and speculation a United Nations resolution will ease the threat of a U.S. military strike on Syria.
Uralkali snapped a five-day slump after a unit of China Investment Co. exchanged bonds it holds in the world’s biggest potash producer for a 12.5 percent stake. The stock advanced 1.6 percent, the second-biggest move on the Micex by index points.
Turkey Policy
The Russian ruble weakened 0.4 percent against the dollar, while Turkey’s lira depreciated the most among 24 emerging-market currencies monitored by Bloomberg to 1.9988 per dollar. The Turkish central bank has done more than necessary to tighten monetary policy and the lira may appreciate, Basci said. The currency’s quarterly drop widened to 3.6 percent, the most among developing nations in Europe, the Middle East and Africa, where eight out of 10 currencies gained in the period.
Hungary’s forint lost 0.4 percent against the euro, while Mexico’s peso and Malaysia’s ringgit declined 0.5 percent to the dollar.
“We are seeing a consolidation considering most emerging markets have rebounded significantly from their lows,” Jerome Gonzalez, a fund manager at Philequity Management Inc., which manages $231 million, said in Manila. “This should be a temporary consolidation.”
Chinese Developers
China Resources Land Ltd. (836) dropped along with other developers, tumbling 3.4 percent after the China Securities Journal reported that the country will start a second round of property training for people working in the taxation system next month, signaling an acceleration of property tax trials.
Indonesia’s stock index lost 2.3 percent on speculation the central bank will raise interest rates to support the rupiah, which has weakened 16 percent against the dollar this quarter. In the past three days, the equity index has almost wiped out the 4.7 percent rally on Sept. 19, the day after the Fed’s decision.
The rupiah depreciated 0.2 percent, after posting its first weekly gain since June in the five days ended Sept. 20. India’s rupee fell for a third day, the longest losing streak in almost a month, after Moody’s Investors Service downgraded the nation’s largest lender.
The MSCI Emerging Markets Index has lost 4.3 percent this year
compared with a 16 percent gain in the MSCI World Index of developed-nation shares. The developing-country index trades at 10.6 times projected 12-month earnings, lower than the multiple of 14 for the MSCI World, data compiled by Bloomberg show. Trading volumes for Russia’s Micex and India’s S&P BSE Sensex Index were at least 22 percent below the 30-day average, data compiled by Bloomberg show.


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