Emerging Currencies Slump as Ruble Tumbles; Stocks Drop on Oil

Frankfurt (Dec. 16)  In today’s “Bart Chart,” Bloomberg’s Mark Barton takes a look at Emerging Market stocks, currencies and sovereign bonds on “Countdown.”

Emerging currencies slumped to a record and stocks retreated for an eighth day as the ruble plunged the most in 16 years and a gauge of Chinese factory output declined. Tumbling oil prices weighed on energy companies.

The ruble retreated 12 percent to 73.02 versus the dollar, erasing a gain of as much as 11 percent, as investors shrugged off a surprise Bank of Russia decision to raise interest rates. The country’s 10-year government bond yields jumped more than 2 percentage points to cross 15 percent for the first time. The Brazilian real and Indian rupee slid 0.9 percent. Equity gauges in Dubai and Saudi Arabia slid to the lowest levels in a year.

A gauge tracking 20 developing-country currencies retreated 1.2 percent to the lowest level since at least 2003 at 1:10 p.m. London time. Oil declined for a fifth day on speculation U.S. producers may further raise output. A reading of Chinese factory activity for December dropped to a seven-month low, adding to the case for further stimulus to halt a slowdown in the world’s second-largest economy. The MSCI Emerging Markets Index fell 1.3 percent to 912.17.

“There is total panic in Russia’s currency, debt and equity markets,” Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki, said by e-mail. “All commodity producers are under pressure. Probably some companies are also buying dollars ahead of year end.”

The premium investors demand to hold emerging-market debt over U.S. Treasuries widened 13 basis points to 410 basis points, according to JPMorgan Chase & Co. indexes.

Rate Surprise

Russia’s central bank unexpectedly raised the benchmark rate to 17 percent from 10.5 percent yesterday, its biggest move yet to shore up the ruble and defuse the currency crisis threatening the country’s stricken economy. The nation’s cash pile has fallen to a five-year low of $416 billion as the central bank spent more than $80 billion this year trying to slow the ruble’s biggest annual retreat since 1998.

Brazil’s real fell for a fifth day in the longest losing streak in a month. The Indian rupee slid to a 13-month low after data showed the nation’s trade deficit widened. The Mexican and Chilean pesos retreated at least 0.2 percent.

The emerging-markets stock index has tumbled 7.5 percent in an eight-day losing streak starting Dec. 5, sending its 14-day relative strength index to 16.7. Some investors see a reading of less than 30 as a signal an asset is poised to rebound.

Pakistan’s Karachi Stock Exchange 100 Index fell 2.7 percent as militants in the country killed 84 children after storming an army-run school in the northwestern city of Peshawar, one of the country’s worst terrorist attacks in years.

All 10 industry gauges in the MSCI Emerging Index fell, led by energy and utility companies. The developing-market measure has lost 9 percent this year and trades at 10.6 times projected 12-month earnings. The MSCI World Index has slid 0.5 percent and is valued at a multiple of 14.9.

Middle East

Dubai’s DFM General Index (DFMGI) plunged 7.3 percent and Saudi Arabia’s Tadawul All Share Index retreated 7.3 percent to the lowest level since June 2013. Emaar Properties PJSC (EMAAR) dropped 10 percent in Dubai, while Al Rajhi Bank fell 6.5 percent in Saudi Arabia. Abu Dhabi’s equity index fell 6.9 percent while gauges in Qatar and Oman retreated at least 2.9 percent.

The Hang Seng China Enterprises Index (HSCEI) of mainland stocks listed in Hong Kong fell 0.7 percent. PetroChina Co. lost 2.3 percent and China Petroleum & Chemical Corp. retreated 1.7 percent. The Shanghai Composite Index gained 2.3 percent as CITIC Securities Co. rallied 6.6 percent.

Source:  Bloomberg