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Emerging Stocks Tumble as China Leads BRICs Down 10% From Peak

April 5, 2013

April 5 (Bloomberg) -- Emerging-market stocks sank to a four-month low, sending the MSCI BRIC Index down 10 percent from this year’s peak as bird flu concerns sparked a slump in Chinese airlines and capital outflows from South Korea accelerated.

China Southern Airlines Co. fell 8.5 percent in Hong Kong on concern the widening bird flu infections may curb travel. Hyundai Motor Co., which competes with Japan’s Toyota Motor Corp. selling cars abroad, slid to a 17-month low in Seoul as the yen traded near its weakest level since August 2009. Foreign funds unloaded a net $1.2 billion of Kospi index shares this week, stock exchange data show, as the risk of conflict with North Korea spurred outflows. OAO MegaFon fell by a record in Moscow after JP Morgan Chase & Co. cut the stock’s rating.

The MSCI Emerging Markets Index slipped 1 percent to 1,006.88 at 5 p.m. in Hong Kong, its fifth day of declines. The gauge has dropped 2.7 percent this week. The MSCI BRIC Index retreated 10 percent from its Feb. 1 high, heading for the threshold that some investors identify as a correction. Six people have died from a new strain of bird flu in China. North Korea said yesterday it passed a law authorizing "counter- actions" against U.S. aggression including a nuclear strike. Data today may show U.S. payrolls growth slowed after weekly jobless claims rose.

"Global funds are skeptical in investing in the emerging markets amid the political and health concerns," Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co. in Mumbai, said in a phone interview today. "Markets will start factoring in the fundamentals once the current headwinds disappear."

Kospi Drops

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong tumbled 3.1 percent, the steepest loss since July 23. South Korea’s Kospi index fell 1.6 percent, capping the biggest weekly loss since May. Russia’s Micex Index dropped 0.2 percent, its third day of declines.

Trading volumes for India’s S&P BSE Sensex were 32 percent lower than the 30-day average for this time of the day, data compiled by Bloomberg show. Volumes were 27 percent lower in the Jakarta Composite Index.

Emerging funds drew inflows of $0.54 billion in the week ended April 3 compared with total outflows of $3.6 billion in the last three weeks, Morgan Stanley said in a report today.

All the 10 industry groups in the MSCI Emerging Markets Index dropped, led by a gauge of consumer discretionary companies. The broader index has lost 4.6 percent this year, compared with a 6.6 percent gain in the MSCI World Index of developed-country stocks. The developing-nations measure trades at 10.2 times estimated 12-month earnings, compared with the MSCI World’s multiple of 13.3, data compiled by Bloomberg show.

Thai Slump


Thailand’s SET Index tumbled 2.6 percent, the lowest level since March 22. Heavy selling by foreign investors yesterday surprised the market, Sukit Udomsirikul, head of research at Maybank Kim Eng in Bangkok, said by e-mail.

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