Emerging stocks fall as China rate cut fails to stop equity rout
By Bloomberg
Emerging-market stocks retreated as phone companies slid and China’s interest-rate cut failed to stop a $5 trillion rout in the nation’s shares. Russia’s ruble weakened.
China Mobile Ltd. slid 1.4 percent in Hong Kong to lead phone shares lower. The Shanghai Composite Index recorded the steepest five-day drop since 1996. Dubai shares fell 1.8 percent after surging 4.6 percent on Tuesday and Russian equities sank 1.4 percent as oil fluctuated. The ruble depreciated 1.2 percent versus the dollar and Malaysia’s ringgit traded near the lowest level since 1998.
The MSCI Emerging Markets Index lost 0.2 percent to 787.10 at 8:22 a.m. in London, following the gauge’s biggest gain in two years on Tuesday. Chinese equities have lost half their value since mid-June as the government struggles to shore up economic growth, curbing demand for riskier assets. China cut interest rates for a fifth time since November and lowered the amount of cash banks must set aside.
“Some traders are skeptical that China’s rate cut is more than enough to solve a fundamental problem,” said Rafael Palma Gil, a trader at Rizal Commercial Banking Corp. “Markets are volatile and that’s giving investors something to think about,” before investing, he said.
The MSCI developing-nations measure had dropped more than 10 percent since China devalued the yuan two weeks ago, dragging the average price-to-earnings ratio for the next 12 months to 10.4 times, a 30 percent discount to the MSCI World Index of developed-country equities.
The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong rose slid 0.6 percent toward the lowest level since March 2014. The Shanghai Composite fell 1.3 percent at the close, after rising as much as 4.3 percent and declining 3.9 percent. The cuts in borrowing costs and lenders’ reserve ratios were announced hours after the benchmark measure dropped 7.6 percent on Tuesday.
An unprecedented government intervention was halted this week as policy makers debate its merits, according to people familiar with the situation.
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