Emerging energy stocks drop to 3-month low on oil as China gains
By Bloomberg
Emerging-market energy stocks headed for a three-month low as oil slid to the weakest level since 2009, while a pledge from Premier Li Keqiang to act if economic growth slows too much boosted China’s shares. The lira rose.
Sasol Ltd. dropped to the lowest level in almost two months in Johannesburg and OAO Gazprom lost 0.5 percent in Moscow. The Bloomberg GCC 200 Index of Persian Gulf equities retreated the most since Jan. 6 as crude declined for a fifth day to $44.40 per barrel. Turkey’s lira strengthened from a record closing low before an interest-rate meeting on Tuesday. The Shanghai Composite Index surged to a five-year high.
The MSCI Emerging Markets Index energy gauge led losses among the 10 industry groups, declining 0.6 percent by 1:08 p.m. in London. Concern that record U.S. supply may start to strain the country’s storage capacity pushed crude to the lowest since November 2009. That’s damping demand for some emerging-market assets before a Federal Reserve meeting this week that will offer clues on the timing of U.S. interest-rate increases.
“Exchange-rate risk remains high, because of Fed uncertainty and oil-price declines,” Maarten-Jan Bakkum, a developing-country strategist at ING Groep NV in The Hague, said by e-mail. “The picture is mixed, with China doing well on new stimulus hopes and the rest down or flat.”
The MSCI Emerging Markets Index was little changed. The measure has underperformed the MSCI World Index of developed- market stocks this year, pushing its valuation to the cheapest level versus developed-country equities since 2006. The former is down 1.6 percent in 2015 compared with a 0.8 percent gain for the latter.
Slumping Oil
Oil’s slump helped send shares in Russia and Saudi Arabia, which count the commodity as their main export earner, down at least 2 percent. Dubai’s DFM General Index closed at its lowest level since Jan. 6.
Stocks in Turkey, a net oil importer, climbed 2.1 percent, while the lira advanced 0.6 percent to 2.6245 per dollar. While West Texas Intermediate contracts fell to a six-year low, Brent dropped 1.2 percent to $54.02 a barrel in London, set for the weakest close since Jan. 30.
Declining oil is helping Turkey narrow its current-account deficit, which fell more than forecast in January. The nation’s central bank will probably keep benchmark borrowing costs unchanged at 7.5 percent on Tuesday, according to 15 of 19 analysts in a Bloomberg survey.
Chinese Growth
A meeting between central bank Governor Erdem Basci and President Recep Tayyip Erdogan last week spurred optimism the government will tone down calls for deeper rate cuts, easing investor concern the monetary authority’s independence was under threat.
A gauge of 20 emerging-market currencies climbed 0.3 percent as Hungary’s forint and Poland’s zloty gained at least 0.4 percent against the euro. The premium investors demand to own emerging-market debt over U.S. Treasuries widened three basis points to 376 basis points, according to JPMorgan Chase & Co. indexes.
Li said Sunday the government will take additional steps if China’s growth, which the government targeted at 7 percent this year, drifts toward the lower limit of its range and cuts into employment or wages.
His comments helped boost the Shanghai Composite Index by 2.3 percent to the highest close since August 2009. The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong increased for a third day, adding 0.9 percent.