File picture: Alex Grimm

Seoul - Emerging-market stocks dropped the most in three weeks as the shooting down of a Malaysian jet in Ukraine fuelled concern tension in eastern Europe will escalate.

The ringgit led currencies lower and Russian equities declined.

Malaysian Airline System Bhd. slumped 11 percent in Kuala Lumpur, with the Bloomberg World Airlines Index slipping for a second day.

The ringgit weakened for the first time in three days, while the FTSE Bursa Malaysia KLCI Index sank to a one-month low.

The Micex Index slid to a seven-week low in Moscow as Gazprom entered its longest losing streak on record.

South African gauge lost 0.8 percent, while indexes in Poland, Turkey, Hungary and the Czech Republic fell at least 0.3%.

The MSCI Emerging Markets Index retreated 0.4 percent to 1,057.88 by 12:25 p.m. in London, the steepest loss on a closing basis since June 25.

Ukraine’s government claimed pro-Russian rebels shot the passenger airplane, killing all 298 people on board.

Israeli soldiers and tanks moved into the Gaza strip in a ground offensive after cease-fire efforts collapsed.

“Both the plane crash and the situation in the Middle East have been quite a shock for the markets,” Lars Christensen, an emerging-market strategist at Danske Bank A/S, said by phone from Copenhagen.

Nine out of 10 industry groups declined in the MSCI gauge, led by health-care companies and energy stocks.

The KLCI index dropped 0.5 percent, the steepest loss since April 8, and the ringgit weakened 0.2 percent.

Malaysian Air retreated the most since May 19.

The disaster comes four months after the disappearance of Flight 370, which contributed to the carrier’s biggest loss since 2011.

Tensions Escalate

The Boeing 777 crashed en route to Kuala Lumpur from Amsterdam in the main battleground of Ukraine’s civil war, threatening to escalate tensions in Europe’s worst geopolitical crisis since the end of the Cold War.

The separatists denied involvement, while Russia President Vladimir Putin said the government in Kiev bore responsibility because the crash wouldn’t have occurred without the current strife in Ukraine.

The Micex slid 1.4 percent, declining for the fifth day, while the ruble climbed 0.4 percent after tumbling the most since September 2011 yesterday.

Gazprom, Russia’s state-run natural gas exporter, lost 1.3 percent and OAO Lukoil headed for its weakest close since May 30.

Russian markets fell yesterday after the US imposed new sanctions on companies to punish Putin for failing to end support for the insurgency.

The Ukrainian Equities Index fell 0.2 percent, taking its three-day drop to 2.6 percent.

Airlines Index

Gedeon Richter, the Hungarian drugmaker which has Russia as its biggest market, fell 2.7 percent, the most in three months, extending its decline this week to 4.4 percent and pushing the benchmark BUX index 1.1 percent lower.

The WIG30 Index in Warsaw lost 0.6 percent, retreating for the first time in six days, while the Borsa Istanbul 100 Index slipped 0.3 percent.

The PX Index in Prague and the FTSE/JSE Africa All Share Index in Johannesburg dropped 0.7 percent each.

Malaysia Airports tumbled 4.9 percent, the most since September 2011.

Cathay Pacific Airways, the biggest international carrier in Asia, declined 0.6 percent in Hong Kong.

The World Airlines index fell 0.2 percent, following a 2 percent drop yesterday.

Equity measures in Thailand and the Philippines dropped 0.2 percent each, while the Hang Seng China Enterprises Index lost 0.3 percent, declining for a third day.

China Property

Vietnam’s VN Index advanced 1 percent to its highest level since April 11.

The developing-nation gauge has risen 5.5 percent this year and trades at 11 times projected 12-month earnings, according to data compiled by Bloomberg.

The MSCI World Index has added 4.3 percent and is valued at a multiple of 15.

The Shanghai Composite Index added 0.2 percent, halting a two-day loss, as China Vanke and Poly Real Estate surged more than 2.4 percent.

The government is being pressured to remove restrictions on home purchases after data today showed prices fell in a record number of cities in June.

China’s housing minister urged cities with large housing inventories to cut them “with all means,” the 21st Century Business Herald reported.

“The US economy is recovering and China is rebounding - so the picture for the global economy is quite positive,” Danske’s Christensen said.

Turkey’s lira climbed 0.5 percent after weakening the most in a month yesterday.

South Africa’s rand and Indonesia’s rupiah appreciated 0.6 percent versus the dollar.

The premium investors demand to own emerging-market debt over US Treasuries fell one basis point to 272, according to JPMorgan Chase indexes. - Bloomberg News