Emerging-market stocks fell from a four-week high after European Central Bank President Mario Draghi didn’t announce any immediate steps to stem the region’s crisis, disappointing investors who expected stronger measures.
The MSCI Emerging Markets Index (MXEF) retreated for the first time in six days, dropping 1 percent to 944.94. Brazil’s Bovespa stock index slid, pushed down by homebuilder MRV Engenharia & Participacoes SA and Lojas Renner SA, the country’s biggest publicly-traded clothing retailer. Samsung Electronics Co. (005930), which gets more than a third of its sales from Europe and America, slid the most in three weeks.
Draghi, speaking to reporters in Frankfurt, signaled the bank will join with governments to buy sovereign bonds without listing definitive measures to bolster growth. Last week, Draghi had pledged to do “whatever it takes” to preserve the euro. The 21 countries in the MSCI emerging market index (VXEEM) send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show.
“Had he not made those comments last week, then this would have been taken positively,” Lars Christensen, the chief emerging-markets analyst at Danske Bank in Copenhagen, said by phone. “He has, to a very large extent, confused the markets.”
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, fell 1.2 percent to $38.73, the lowest level in a week. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, declined 1.4 percent to 27.09.
The Bovespa fell 1.4 percent in Sao Paulo, with Lojas Renner dropping 4.4 percent, the most since April 10. MRV Engenharia & Participacoes lost 5.8 percent, falling for a third day. The company was added yesterday to a Brazilian list of companies whose workers operate in slave-like conditions.
The Shanghai Composite Index (SHCOMP) fell 0.6 percent. Poly Real Estate (600048) slumped 9.2 percent. Chinese Premier Wen Jiabao said the country will “unswervingly” implement property controls and prevent housing prices from rebounding, the official Xinhua News Agency reported this week, citing a government meeting held on July 26.
The Hang Seng China Enterprises Index (HSCEI) lost 1 percent, the steepest drop since July 23. China Railway Construction Corp. (1186) fell 3.5 percent after agreeing to buy a 15 percent stake in Inter Milan, an Italian soccer club, according to people familiar with the talks. Dubai’s DFM General Index (DFMGI) rose 0.2 percent, climbing for a fourth day and reaching its highest level since May 8.
The Kospi Index (KOSPI) slid 0.6 percent in Seoul. Samsung Electronics, South Korea’s largest exporter of consumer electronics, declined 2.9 percent in Seoul. Korea Gas Corp. (036460) rose 2.7 percent after its partner Eni SpA (ENI) announced a “new giant” gas discovery off the coast of Mozambique.
Taiwan’s financial markets were closed due to a typhoon.
The swaps gauge typically rises as investor confidence deteriorates and falls as it improves. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries increased 2 basis points to 336 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.