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Rand leads fall in emerging market stocks

Bloomberg

Emerging market stocks fell on Wednesday, led by concern that valuations were overdone.

Emerging market stocks have ended an eight-day rally, led by the rand. (Reuters)

Emerging-market stocks fell for the first time in eight days amid concern the rally that drove valuations to a three-year high is overdone. South Africa’s rand led currencies lower.

Tencent Holdings paced declines for developing-nation technology shares. Russian stocks slid as Brent recorded its longest losing streak in more than four years. Hungary’s BUX index dropped as Mol, the country’s largest refiner, sank to a five-year low. The rand weakened 0.2%. Indonesia’s rupiah forwards surged 1.6% as unofficial counts at polling booths showed Joko Widodo leading Indonesia’s presidential race.

The MSCI Emerging Markets Index lost 0.5% to 1 059.60 at 12.42pm in London, slipping from a 16-month high. The gauge is set to end the longest stretch of gains since April that pushed valuations to the most expensive since 2011. US equities sank for a second day from record levels on Tuesday as internet and biotechnology shares retreated.

Wednesday’s drop is a bout of profit-taking amid a decline in US stocks, Hertta Alava, head of emerging markets at FIM Asset Management in Helsinki, said by email. “Fund flows have been positive lately.”

Nine out of 10 industry groups in the developing-nation measure slipped, led by technology and consumer-discretionary stocks. Tencent, Asia’s largest internet company, dropped 3.3% in Hong Kong, its second day of losses. The technology gauge has surged 17% this year.

Oil retreats
The Micex declined 1.2%, ending two days of increases, as OAO Lukoil, the second-biggest stock by weighting in the benchmark measure, lost 2%. Brent crude fell 0.1% to $108.80, slumping for an eighth day in the longest losing streak since December 2009, amid signs Libyan oil exports will rebound.

Ukrainian rebels seized a town in the Luhansk region after a retreat from eastern strongholds as European Union states considered expanding a list of Russians facing sanctions.

The BUX index fell 1.5% to a two-month low as Mol declined 3.1%. Mol’s initial retreat was down to a drop in oil prices and that prompted investors to sell the stock and cover losses, David Sandor, an analyst at KBC Groep NV’s Budapest-based brokerage, said by phone.

The PX index in the Czech Republic climbed 0.8%, led higher by Erste Group Bank’s 3.6% gain. The Austrian lender slumped 22% in the previous three trading days to a one-year low after saying it expects a record loss this year.

Egypt gains
Egypt’s benchmark EGX 30 Index rose for a second day, climbing 1.1%. Thailand’s SET Index rose less than 0.1%, its 10th day of gains and the longest stretch of advances since August 2010.

The emerging-markets gauge has risen 5.7% this year and trades at 11 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 4.7% and is valued at a multiple of 15.1 times.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 1.6%, the most in two weeks. The Shanghai Composite Index slid 1.2%, its steepest loss since June 19. Data today showed China’s producer prices fell in June at the slowest pace in more than two years, while the inflation rate grew less than estimated.

Rupiah forwards
In Indonesia, one-month non-deliverable forwards traded offshore strengthened 1.6%, the most since February 14 on a closing basis. Widodo, known locally as Jokowi, has 54.25% of votes, compared with Prabowo Subianto’s 45.75%, according to an unofficial survey by Saiful Mujani Research & Consulting.

The survey is based on 53.38% of votes counted after polls closed at 1pm in Jakarta. Jokowi has an eight percentage point lead with 69.4% counted, according to Lingkaran Survei Indonesia.

The S&P BSE Sensex Index in Mumbai Indian stocks fell 0.5%, extending its 2% drop on Tuesday from a record high, before the government announces its budget tomorrow. The Philippine Stock Exchange Index retreated 0.6%, its second day of declines.

The premium investors demand to own emerging-market debt over US Treasuries fell three basis points to 260, according to JPMorgan Chase indexes. – Bloomberg

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