Jakarta - Most emerging-market stocks fell as worse-than-expected Chinese manufacturing data put the brakes on a rebound in riskier assets, while South Africa’s rand and the Mexican peso fell the most among peers.
The Shanghai Composite Index extended its worst monthly loss since 2008 after an official factory gauge slumped to a three-year low. Stock indexes in Vietnam, Poland and Dubai decreased at least 0.6 percent, while equities in Abu Dhabi, Qatar and Oman climbed. The Indonesian rupiah strengthened 1 percent against the dollar. The rand ended a two-day gain as the Bloomberg Commodity Index headed for the biggest drop in more than a week. Russian and Turkish bonds fell amid concern inflation will quicken.
Deteriorating Chinese factory data showed policy makers may struggle to prop up the world’s second-largest economy, casting doubt on the sustainability of a recovery that boosted the MSCI Emerging Markets Index 4.5 percent last week and sent currencies rallying the most in more than three months. The gains were supported by measures from the Bank of Japan on Friday to impose negative interest rates to revive lending.
"Emerging-market investors may want to take profits on the recent rally, given the lack of fundamental justifications for it," said Michael Wang, a strategist at hedge fund Amiya Capital in London, who prefers Indian, Indonesian and Russian shares.
Investors will be watching US data this week to gauge the strength of the world’s largest economy and the timing of another interest-rate increase. Reports include consumer spending and manufacturing figures today and monthly payrolls data on Friday.
The MSCI Emerging Markets Index declined 0.1 percent to 741.75 by 10:47 a.m. in London, as 321 stocks fell and 293 advanced. While the gauge jumped last week, it retreated 6.5 percent in January. A measure tracking 20 developing-nation currencies was little changed on Monday after falling 1.5 percent last month.
“Japan’s monetary policy may lead to a weaker yen that could be negative for the outlook of some emerging economies which depend on exports, while it might benefit countries with strong domestic consumption like Indonesia,” Kim Kwie Sjamsudin, head of research at Yuanta Securities Indonesia, said by phone from Jakarta. “Some investors are also speculating that there will be more easing of monetary policy from other central banks.”
Stocks
Half of the 10 industry groups in the MSCI gauge retreated today, led by consumer discretionary companies, while health- care and technology stocks led gains. Samsung Electronics Co. advanced 1.1 percent in Seoul and Taiwan Semiconductor Manufacturing added 1.4 percent in Taipei.
The Shanghai Composite declined 1.8 percent, extending this year’s drop to 24 percent. PetroChina Co., the nation’s most valuable energy producer, lost 2.8 percent after saying its annual net income probably fell as much as 70 percent. China Life Insurance Co., the largest insurer, tumbled 4.2 percent after reporting earnings for 2015 that trailed forecasts. The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong ended a three-day advance.
Shares in Abu Dhabi climbed 1.3 percent and the Nigerian Stock Exchange All Share Index gained, while stocks in Egypt lost 1.3 percent and the Micex Index ended a three-day rally in Moscow.
Read: China shares fall as economic pulse slows
Currencies
The rand led declines among developing-nation peers, followed by the Mexican peso, Turkish lira and Russian ruble. Brent crude for April settlement decreased after rallying 10 percent last week. Crude output at the Organisation of Petroleum Exporting Countries rose to a record.
The yuan traded in Hong Kong weakened 0.27 percent, the most in two weeks following the China factory gauge data. A depreciation of 1 percent in the Chinese currency leads to a decline of 0.6 percent in commodity prices, according to Bank of America Corp.
The lira declined for the first time in a week. Russia will “face consequences” if it doesn’t respect the Mediterranean nation’s sovereignty, Turkish President Recep Tayyip Erdogan said over the weekend, after his government reported the second Russian violation of the country’s airspace in two months.
Indonesia’s rupiah gained the most since October by the close in Jakarta on speculation the nation’s assets will lure more inflows amid monetary easing by some of the world’s biggest central banks.
Bonds
The premium investors demand to own emerging-market debt over Treasuries narrowed two basis points to 461, according to JPMorgan Chase & Co indexes.
South Korean bonds gained, sending yields to record lows, as slumping exports and a weak yen spurred speculation the central bank will cut interest rates to support growth. After the trade figures, there is a “substantial risk” that the Bank of Korea will cut its policy rate from 1.50 percent before June, Nomura Holdings Inc. wrote in a report.
Russian bonds declined for a second day after the central bank warned on Friday that it may consider raising rates to combat the risk of accelerating inflation. The yield on five- year notes climbed four basis points to 10.35 percent.
The rate on two-year Turkish debt increased 13 basis points to 11.12 percent. Landesbank Berlin Investment said shorter-dated Turkish yields would need to rise another 150 to 200 basis points to make them attractive as accelerating inflation spells more gloom for the nation’s bonds.
-With assistance from Moonyoung Tae.
BLOOMBERG