Emerging market stocks fall to 10-month low as currencies plunge

Jakarta/London: Emerging-market stocks retreated to a 10-month low and currencies fell as oil extended its decline to the weakest level in five years. Russia’s ruble slid below 64 per dollar for the first time ever.

The Ibovespa dropped 2% as a report signalled that Brazil’s economy unexpectedly contracted in October. PTT Pcl, a Bangkok-based oil company, slumped 4.9%, dragging Thailand’s stock gauge down the most since January. China Mobile Ltd fell to a seven-week low. Russia’s currency plunged to a record 64.445 per dollar before the central bank raised benchmark borrowing costs by 6.5 percentage points. Indonesia’s rupiah depreciated 2%.

The MSCI Emerging Markets Index lost 1.5% to 924.06. Crude dropped 3.3% in New York after the United Arab Emirates said Organisation of Petroleum Exporting Countries (Opec) will refrain from cutting output even if prices slumped to as low as $40. Federal Reserve policy makers meet this week to review their stance on the timeframe for a US interest-rate increase. A Bloomberg gauge tracking 20 developing-economy currencies declined 1.5%.

“The plummeting oil prices have been one of the more surprising economic developments in 2014,” Ruth Lea, economic adviser at Arbuthnot Banking Group Plc in London, said by e- mail. “Moreover, prices should remain weak into 2015. Of course, there are losers including the oil companies and net oil-exporters.”

All 10 industry groups in the MSCI Emerging Markets Index fell, led by energy companies. The premium investors demand to hold emerging-market debt over US Treasuries increased seven basis points to 389 basis points, according to JPMorgan Chase and Co. indexes.

Russia rates

The ruble depreciated for a sixth day. Russia’s central bank, at an unscheduled meeting, lifted its benchmark interest rate to 17% from 10.5%, effective 16 December. Policy makers increased borrowing costs to limit the currency’s drop and inflation risks, according to a statement on the monetary authority’s website.

Russia’s Micex Index slipped 2.4%. The dollar- denominated RTS Index tumbled 10%.

Petroleo Brasileiro SA, the Brazilian state-run oil producer, declined 9.9% as the Ibovespa fell for a second day after entering a bear on 12 December. The central bank said the seasonally adjusted economic index, a proxy for gross domestic product (GDP), fell 0.26% in October from a month earlier. Economists’ median forecast was for a 0.25% increase. The real dropped 1.5% to a nine-year low.

Equities in Turkey retreated 0.5% to the lowest in almost a month after police detained the editor-in-chief of the country’s best-selling daily and the head of a television station. The lira weakened 3.3%.

Dubai’s DFM General Index rose 0.1% following a 26% drop in the previous nine days. Abu Dhabi equities retreated 0.7% to the lowest level almost in a year. Five indexes in the Middle East have entered bear markets since 30 November.

Oil prices have dropped about 25% since Saudi Arabia led Opec’s decision to maintain its production target at a 27 November meeting. The market will stabilize and Opec will wait at least three months before considering an emergency meeting, UAE energy minister Suhail Al-Mazrouei said.

PTT slid for a fifth straight day, while its unit PTT Exploration and Production Pcl sank 5.3% to a five-year low. Thailand’s SET Index fell 2.4%. Malaysian equities tumbled 2.1%.

China Mobile sank 1.9% to its lowest close since 27 October in Hong Kong. Tencent Holdings Ltd slid to a six-month low. The Shanghai Composite Index rose 0.5% on bets the government will take more steps to support growth.

The rupiah fell to the lowest level since the Asian financial crisis in 1998 as an increase in dollar buying by local companies before the year-end coincided with a rout in the sovereign-bond market.

Developing-country stocks have dropped 7.8% this year and are valued at 10.6 times their 12-month projected earnings, according to data compiled by Bloomberg. The MSCI World Index trades at a multiple of 14.8 and has slid 0.4% in the period. Bloomberg