London: Emerging-market stocks fell, heading for the biggest decline in at least a week, as lower commodity prices dragged down producers in Russia and South Africa. Dubai’s equity market sank the most worldwide on debt concerns.
The MSCI Emerging Markets Index lost 0.6% to 977.79 in London. OAO GMK Norilsk Nickel, Russia’s biggest mining company, led the 30-stock Micex down 1.7%. The FTSE/JSE Africa All Share index slipped as much as 1.9% as gold headed for its sharpest two-day fall in almost 14 months, undermining the outlook for earnings from one of South Africa’s largest sources of foreign revenue.
The MSCI gauge of 22 developing countries has rallied 72% this year, almost three times the 27% gain for advanced nations, as prices surged for raw materials that sustain emerging economies on signs of global economic recovery.
Copper fell for a third day in London and gold slumped as much as 3.4% on Monday as the dollar strengthened, reducing the appeal of commodities as an alternative investment.
The Dubai Financial Market General Index dropped 5.8% to the lowest since 22 July amid deepening concern about the outcome of a $26 billion (Rs1.2 trillion) debt restructure by state holding company Dubai World. Dubai World’s unit Nakheel PJSC is due to repay $3.52 billion of debt in one week.
The extra yield investors demand to own developing nations’ bonds instead of US treasurys rose from a four-week low, increasing three basis points to 3.07 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index. One basis point is one-hundredth of a percentage point.
Romania’s BET index fell 3.6%, poised for the biggest drop since 2 October, after preliminary vote-counting signalled Romanian President Traian Basescu will narrowly win re-election and deepened investor concern about further payments of the country’s International Monetary Fund (IMF) bailout loan.
“Romania needs a new government as soon as possible in order to resume cooperation with the IMF,” Elisabeth Andreew, strategist at Nordea Bank AB in Copenhagen, wrote in a client note. “Uncertainty has clearly risen and we see risks of new parliamentary elections as higher if Basescu wins.”
The cost to protect against a default by Romania rose for the first time in seven days, with credit-default swap linked to the government’s debt climbing 6.5 basis points to 256, according to CMA Datavision. That means the contracts, which rise as perceptions of credit quality deteriorate, cost €256,000 a year to protect €10 million of debt.