Emerging stocks retreat to 5-week low amid Ukraine tension

Jakarta: Emerging stocks fell to a five-week low as Chinese shares sank and concern deepened over tensions in Ukraine. India’s rupee and South Korea’s won weakened.

China Coal Energy Co. retreated 2.2% in Hong Kong after surging 16% last month. OAO Sberbank led Russia’s Micex Index to a three-month low. Samsung Electronics Co. led declines for technology shares while Taiwan’s HTC Corp. dropped to the lowest level in nine years. The rupee slid to a 4-month low versus the dollar and the won lost 0.6%.

The MSCI Emerging Markets Index fell 0.5% to 1,058.29 at 2:06 pm in Hong Kong. A gauge of mainland Chinese shares listed in Hong Kong, which entered a bull market last week, slid for a second day. Poland warned of a possible Russian invasion on Ukraine, while the fastest growth in US service industries since 2005 spurred bets the Federal Reserve will raise interest rates sooner than projected.

Tension in Ukraine is an excuse for investors to cash in the recent rally in equities, said Christopher Wong, a senior investment manager in Singapore at Aberdeen Asset Management Plc. Valuations are looking rich considering a slower growth outlook for the global economy.

The measure for developing stocks has risen 5.5% this year and trades at 11 times 12-month projected earnings, data compiled by Bloomberg show. The MSCI World Index has gained 2.1% and is valued at a multiple of 14.6.

China coal

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong fell 0.5%, extending Tuesday’s 0.7% loss. China Coal Energy sank the most since 15 May. The Shanghai Composite Index trimmed losses and traded little changed. The gauge, which had rebounded 11% from this year’s low, will probably end its rally within days and fall about 10%, according to Tom DeMark, the developer of market-timing indicators.

The Micex dropped 0.7%, poised for the lowest close since 6 May. Sberbank lost 1.6%. Russian President Vladimir Putin ordered his government to respond to US and European sanctions as Poland said a renewed buildup of Russian troops on Ukraine’s border raises the specter of a possible invasion.

Eight out of 10 industry groups in the emerging-markets gauge, slid led by phone companies and consumer-discretionary shares. Samsung, the world’s largest smartphone maker, lost 1.2% in Seoul, as a developing-nation technology gauge slid for a second day. The Kospi index dropped 0.3%.

HTC tumbles

HTC slumped 5.8% in Taipei, its third day of losses. KGI Securities Co. has a negative view on HTC’s second half amid fierce competition, according to a note, after its July sales dropped 33%.

ScinoPharm Taiwan Ltd. slumped 5.6% after Deutsche Bank AG cut its price target by 39% as it lowered the stock to hold from buy on Tuesday.

The rupee weakened 0.7% while the won declined for the first time in three days. Currencies in Indonesia and Malaysia lost at least 0.4%. Service industries in the US expanded in July, driving speculation economic growth is robust enough for the Fed to raise its benchmark interest rate before the middle of next year.

The Jakarta Composite Index fell 1.1%, the most among benchmark gauges in Asia. Indonesia’s Constitutional Court began hearing on legal challenges from former general Prabowo Subianto who demanded the judge to declare him winner due to alleged vote fraud by President-elect Joko Widodo. BLOOMBERG