Emerging markets continue slump

Emerging-market stocks headed for the longest losing streak since August before the Fed meeting.

Johannesburg - Emerging-market stocks headed for the longest losing streak since August, led by health-care companies and financial shares, as investors switched out of riskier assets before next week’s Federal Reserve meeting. South Africa’s rand weakened for a sixth day.

The MSCI Emerging Markets Index fell for a seventh day as its 14-day relative-strength index slid to 30.2, near the level of 30 that some traders see as a signal a market is set to rebound. Chinese shares in Hong Kong dropped to a 10-week low. Aspen Pharmacare Holdings paced losses for drugmakers. South African lenders tumbled and the rand was poised for the longest slump since 2013 after the nation’s finance minister was fired. Indonesia’s rupiah retreated to the weakest in two months.

Developing-nation equities are headed for the biggest weekly drop in a month as commodity prices tumbled and speculation grew that the Fed will next week end a seven-year era of near-zero interest rates. Tighter US policy will curb the appeal of higher returns offered in less-developed countries. Futures traders put the probability of a Fed rate increase this month at 78 percent.

“The biggest factor weighing down the market is what the US will do next week and how investors will react once the Fed increases rates,” said Nescyn Presinede, a trader at Manila- based Rizal Commercial Banking, which manages $1.8 billion in trust assets. “Most investors are in a watching mode. We aren’t aggressive in taking positions even if prices are low.”

The MSCI emerging-markets measure fell 0.5 percent to 791.39 at 8:09 a.m. in London. The index is within 3 percentage points of a six-year low. The gauge has slumped 17 percent this year, poised for its worst annual drop since 2011. It is trading at 10.9 times 12-month projected earnings, a 28 percent discount to the MSCI All-Country World Index, which has fallen 4.2 percent in 2015.

Nine out of 10 industry groups in the developing-nation gauge retreated, led by health-care companies and financial shares. Aspen Pharmacare sank to a two-month low in Johannesburg. South African banking stocks Standard Bank Group Ltd. and FirstRand Ltd. tumbled more than 4 percent.

The Taiex fell to the lowest close since Sept. 30 as smartphone maker HTC plunged 8.1 percent, taking losses for the company this year to 50 percent. The stock is the biggest decliner among developing-nation shares. Vietnam shares slid 0.7 percent. Equity gauges in Malaysia, Indonesia and the Philippines lost 0.4 percent.

Chinese shares

Hong Kong’s Hang Seng China Enterprises Index dropped 1.1 percent, its sixth day of declines. The Shanghai Composite Index slid 0.5 percent amid concern the government’s efforts to make domestic consumption and services a bigger part of the economy won’t be fast enough to offset sluggish demand for industrial goods and commodities. Data this week showed China’s factory- gate prices dropping for the 45th straight month.

A gauge of emerging-market currencies traded near a record low. The rupiah weakened 0.6 percent on concern Indonesia will be vulnerable to outflows if the Fed raises borrowing costs next week. South Korea’s won lost 0.2 percent after the Bank of Korea kept interest rates unchanged. Russia’s ruble climbed for a third day. Turkey’s lira added 0.1 percent after the country’s economic growth data beat estimates.

The rand fell 0.1 percent, reversing earlier gains, after sinking to a record low on Wednesday as President Jacob Zuma fired the nation’s finance minister Nhlanhla Nene and replaced him with a little-known lawmaker. Yields on rand-denominated debt due December 2026 jumped 64 basis points to 9.46 percent, the highest since October 2008 and resulting in the biggest drop in prices on the bond on record.

Nene’s “removal suggests that there was a clash with President Zuma about how deep the fiscal cuts should be,” said Win Thin, the head of emerging-markets strategy at Brown Brothers Harriman & Co in New York. “I reiterate my long- standing call that the nation gets cut to sub-investment grade, and now it’s sooner rather than later.”

BLOOMBERG