Emerging Stocks Drop Most in 2 Weeks on China Concerns

Emerging-market stocks fell the most in two weeks after Chinese Premier Wen Jiabao said the nation’s economy faces “relatively large” downward pressure, and as U.S. jobs data missed estimates.
HTC Corp. (2498), Asia’s second-largest smartphone maker, slid to a two-year low after profit declined. E Ink Holdings Inc. (8069) sank the most in seven months, leading technology companies to the steepest drop among 10 industry groups on the MSCI Emerging Markets Index (MXEF), after sales plunged. China Yurun Food Group Ltd. (1068), the nation’s second-largest meat-product supplier, tumbled 9.2 percent after chairman and founder Zhu Yicai left active management of the company.
The MSCI Emerging Markets Index lost 1 percent to 936.67 as of 3:26 p.m. in Hong Kong, falling for a fourth day. The measure is poised for the longest losing streak in more than a month. China’s Wen said the government will intensify fine-tuning of policies, the official Xinhua News Agency reported yesterday. The nation’s consumer-price inflation eased to a 29-month low in June, the National Bureau of Statistics said today in Beijing. American employers added fewer workers to payrolls than forecast in June, a July 6 report showed.
“The disappointing U.S. jobs data, which is key for consumption, and lower price gains in China all point to slowing growth,” Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion, said by phone today. “It’s inevitable some developing countries that highly depend on exports will feel the pinch.”

China Stocks

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong sank 2.4 percent, headed for its steepest decline since June 4, while the Shanghai Composite Index (SHCOMP) slid 2 percent to the lowest in six months. South Korea’s Kospi Index lost 1.2 percent.
The Philippine Stock Exchange Index dropped 1.8 percent, the sharpest loss since June 4. The Philippine peso weakened after government tightened rules on capital inflows.
The FTSE/JSE Africa All Share Index (JALSH) slid 0.5 percent in Johannesburg, heading for its first decline in five days. Benchmark indexes fell 0.5 percent in Hungary and 0.4 percent in Poland. The Micex Index gained 0.4 percent in Moscow, its first increase in three days, as oil prices rose.
The developing-nation gauge has advanced 2.4 percent this year, compared with a 3.7 percent gain in the MSCI World Index of developed nations. Shares in the emerging stocks gauge are trading at 10.2 times estimated earnings, compared with the MSCI World’s multiple of 12.2, data compiled by Bloomberg show.

Biggest Drag

All industry groups on the developing-markets index fell today, with industrial stocks the second-biggest decliners. Data showed Japan’s machinery orders fell 14.8 percent in May from a month ago, the biggest drop since comparable figures were made available in 2005.
China Shipping Container Lines Co. tumbled 7.1 percent in Hong Kong and Hyundai Engineering & Construction Co. lost 6.5 percent in Seoul. The two companies led declines in the gauge of industrial stocks in the MSCI Emerging Markets Index.
Samsung Electronics Co. (005930), the world’s largest maker of televisions and mobile phones, dropped 3 percent in Seoul, the biggest drag on the developing-nation index, amid concern that a global economic slowdown may crimp sales.
Angang Steel Co. slumped 4.7 percent in Hong Kong, pacing declines for steelmakers, after saying it expects to swing to a loss in the first half after prices plunged.

China Growth

Jiangxi Copper Co. and PetroChina Co. fell at least 3 percent in Hong Kong, leading a slump for material and energy producers, before a report later this week that may show economic growth slowed to 7.7 percent in the second quarter.
The People’s Bank of China lowered the benchmark one-year lending rate by 0.31 percentage point on July 5, the first reduction in borrowing costs since 2008.
Chinese economists’ forecasts for second-quarter growth are “too optimistic,” according to Lu Ting, China economist at Bank of America Corp.’s Merrill Lynch unit.
Bank of America estimates growth of 7.5 percent in the second quarter, though it may be as low as 7.3 percent to 7.4 percent, Lu said in a Bloomberg Television interview today from Hong Kong. He predicts two more interest-rate cuts by the end of this year and three more reductions in lenders’ reserve- requirement ratios.

China Yurun Tumbles

China Yurun Food Group plunged in Hong Kong to the lowest level since October 2006. The company appointed Chief Executive Officer Yu Zhangli as chairman and named Li Shibao as his replacement, the change coming less than 10 days after it rejected allegations of accounting irregularities and contaminated products as “groundless.”
Yu was named CEO in March after the company said first- quarter earnings suffered from a 2011 news report about illegal additives in some of its meat.
Zhu Yicai quit as an executive director and was appointed honorary chairman and senior adviser, Yurun said in a July 6 statement.
HTC retreated 5.6 percent in Taipei, the lowest close since March 2010, after saying second-quarter net income declined 58 percent from a year earlier to NT$7.4 billion ($247 million). That compares with the NT$7.59 billion average estimate of 13 analysts surveyed by Bloomberg after the company last month cut its profit guidance.

India, Vietnam

E Ink Holdings slumped 7 percent after the supplier to Amazon.com Inc.’s Kindle said June sales plunged 71 percent from a year earlier to NT$532.5 million.
The BSE India Sensitive Index dropped 0.9 percent, bound for the largest slide since June 18, as lower-than-average monsoon rains threaten the nation’s efforts to tame inflation and spur economic growth. The rupee weakened for a fourth day.
Vietnam’s VN Index declined 1.8 percent, the most in more than a month, after the government said economic growth may trail its forecast.

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