Emerging stocks trim monthly rally

Emerging-market equities fell, paring the best monthly rally since January 2012, on concern China’s economic recovery may lose traction. OAO Sberbank led declines in Russia and the rand depreciated to a three-week low.

Bloomberg News reported that the MSCI Emerging Markets Index fell 0.4 per cent to 999.24 at 1:35pm in London. The Shanghai Composite Index in China slid for a second week, while Nine Dragons Paper Holdings Limited retreated in Hong Kong after reporting earnings.

Russia’s benchmark Micex Index declined the most among major eastern European peers as Sberbank, the nation’s biggest lender, fell on bets it will need more capital to pay dividends at a level sought by the government. The rand lost 1.2 per cent as South African companies demanded foreign currency to pay for imports.

The emerging-markets index jumped 7.5 this month, boosted by the Federal Reserve’s decision to refrain from tapering monetary stimulus. China’s economy slowed this quarter as growth in manufacturing and transportation weakened in contrast with official signs of an expansion pickup, a private survey showed this week.

“Nervousness about a possible US government shutdown and some early signs that suggest that the Chinese recovery is losing steam already” weighed on stocks, Maarten-Jan Bakkum, a senior emerging-markets strategist at ING Investment Management in The Hague, said by e-mail. There are “clearly weakened fundamentals in the emerging world that justify a negative bias to EM assets for the coming quarters, perhaps years.”

Nine out of 10 industry groups in the MSCI Emerging Markets Index slumped, led by financial and health care companies. Increases in business-investment and real estate revenue in China slowed this week, a survey from New York-based China Beige Book International showed September 24.

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