London - Emerging-market stocks from China to Russia fell as data signaled the slowdown in the two economies is deepening, while Greek equities slumped as they resumed trading. The ruble led declines in currencies as oil slid.
The MSCI Emerging Markets Index dropped 1.2 percent to 891.34 by 11.50 am in London, extending the biggest monthly slide since September. The dollar-denominated RTS Index retreated 2.7 percent in Moscow and the ruble slumped to the lowest level since March as Brent crude extended July’s 18 percent decline. PetroChina led losses among energy companies as Chinese factory data missed forecasts. Stocks tumbled 17 percent in Athens.
Russian stock, bond and currency markets were the biggest decliners among developing nations today as manufacturing in the world’s largest energy exporter unexpectedly deteriorated in July. The final reading on a private Chinese factory index on Monday shrank more than expected, while an official gauge on Saturday slid to a five-month low, stoking concern over how the worsening slowdown will affect global trade.
“A lower oil price is just one symptom of global overcapacity,” according to Daniel Salter, the head of equity strategy at Renaissance Capital in London, who recommends investing in countries that are pursuing government policy changes such as Pakistan, Egypt and Romania.
Since emerging markets benefit from investment in industrial capacity and commodities, “if it takes longer for global capacity constraints to be reached, there’s certainly an argument that the emerging-markets story gets pushed out,” he said.
Outflows accelerate
Oil, which entered a bear market in July, retreated on Monday as Iran vowed to boost production immediately after sanctions.
Outflows from the developing world have been picking up pace. US exchange-traded funds that invest in emerging markets faced $4 billion of net outflows in July, the most since January 2014.
Money leaving eight emerging nations including Indonesia, Thailand and South Africa reached more than $2.5 billion over the past week amid a slump in global commodity prices and concerns about tighter monetary policy by the Federal Reserve, according to a report from Capital Economics.
As equity indexes from Shanghai to Turkey declined at least 1.1 percent on Monday, 14 of 24 developing-country currencies depreciated against the dollar. A gauge tracking 20 of the exchange rates weakened for a third day to a record low.
Russia’s slowdown
The ruble declined 1.3 percent to 62.514 per dollar, after sliding 3.2 percent on Friday following a central bank decision to cut interest rates by 50 basis points to 11 percent. While they got a small boost that day, government bonds resumed declines on Monday, sending yields up nine basis points to 10.99 percent today.
Russian policy makers are trying to support an economy that’s facing its steepest slowdown since 2009. The nation’s purchasing managers’ index fell to 48.3 from 48.7 in June, remaining below the 50 threshold that separates contraction from growth, Markit Economics said Monday.
The Shanghai Composite sank to a three-week low as the Chinese Caixin final manufacturing purchasing managers’ index slipped to 47.8 in July, the lowest since July 2013. Malaysia’s ringgit fell to a 16-year low as data pointed to a contraction in the country’s factory output.
Turkish 10-year bonds declined, sending yields up seven basis points to 9.63 percent, while the lira lost 0.2 percent to 2.7776 per dollar. President Recep Tayyip Erdogan is standing in the way of the formation of coalition government, main opposition CHP leader Kemal Kilicdaroglu said before the last round of scheduled talks with the ruling AK Party on Monday, according to state-run news agency Anadolu.
In Asia, technology shares retreated, dragging an emerging-market gauge of the industry to a 16-month low. MediaTek losing 9.9 percent in Taipei after the chip designer forecast sales that trailed estimates.
BLOOMBERG