Stocks in emerging markets fell yesterday, extending the biggest weekly drop in five weeks as investors weighed the timing of an increase in US interest rates and Chinese industrial companies’ profits slumped.
PT Astra International led Indonesian shares toward a 21-month low as the rupiah weakened for a fifth day. Equity gauges in Thailand, the Philippines, Vietnam and Malaysia slid at least 0.4 percent. The Shanghai Composite Index dropped to a one-week low. The ringgit sank to the lowest level in 17 years versus the US dollar. Markets in Hong Kong, South Korea and Taiwan were closed for holidays.
The MSCI Emerging Markets Index lost 0.2 percent to 787.82 at 1:22pm in Hong Kong. US data Friday showed the world’s largest economy grew more than previously forecast in the second quarter, a sign that the country might be able to withstand higher borrowing costs. Federal Reserve Chair Janet Yellen said the central bank is on track to raise rates by December. Chinese industrial companies reported profits fell the most in at least four years.
“The likelihood of higher US rates could lead to capital outflows from emerging markets, while the weak Chinese data clearly shows its economy is not on the road to recovery just yet,” said Norico Gaman, head of research at Jakarta-based PT BNI Securities. “However, with stock prices and valuations already having dropped severely, investors with long-term investment horizon may start selectively buying some stocks.”
The developing stocks gauge fell 19 percent this quarter, on course for its steepest quarterly retreat since September 2011. The measure trades at 10.5 times 12-month projected earnings, a 29 percent discount to the MSCI World Index, according to data compiled by Bloomberg.
All 10 industry groups fell, led by consumer companies. Astra International sank 4.3 percent, the biggest drag in the Jakarta Composite Index, which slid 1.6 percent. The rupiah headed for the longest losing streak since an eight-day drop through Aug. 26. Thai shares declined toward the lowest close since Sept. 1 and Philippine equities decreased for a fifth day.
The Shanghai Composite retreated 0.4 percent, its second day of losses. Industrial companies’ profits plunged 8.8 percent last month, compared with a 2.9 percent drop in July. Trading volumes in Shanghai plunged 52 percent below the 30-day average before a week-long holiday that starts on Thursday.
Indian shares were little changed before an interest-rate decision today. The ringgit weakened 0.5 percent, its fifth day of losses, while the Thai baht and the Philippines peso depreciated at least 0.2 percent.
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