Emerging Stocks Drop With Currencies as China PMI Spurs Selloff

 

Emerging-market stocks headed for a two-week low and currencies tumbled as a surprise decline in a Chinese manufacturing gauge to the lowest level in six years deepened concerns of a global slowdown.

The Hang Seng China Enterprises Index sank 2.7 percent and the Shanghai Composite Index ended a three-day gain.
Citic Securities Co. slumped to an 18-month low in Hong Kong after people familiar with the matter said a government probe has found evidence of insider trading. Indonesian equities fell 2.3 percent and the rupiah slid 1 percent versus the dollar after the country cut its economic growth forecast. Malaysia’s ringgit lost 1.2 percent. South Africa’s rand slipped before an interest-rate decision.
MSCI Emerging Markets Index dropped 1.5 percent to 795.85 at 9:08 a.m. in London, poised for the lowest close since Sept. 8. China’s preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics slid to the lowest level since the depths of the global financial crisis. The data underscored concerns that the slowdown risks hurting developing countries that rely on the world’s second-largest economy for their exports.
“The data showing a continued slowdown is a concern, both directly and through the dramatic falls in commodity prices,” Miles Remington, head of equities at PT BNP Paribas Securities Indonesia, said by e-mail, referring to the China PMI data. “We are awaiting a catalyst for investors to look at earnings and valuations as these investors are currently not here and have little reason at present to return.”

Stock Valuations

The MSCI emerging-markets stock gauge has slumped 17 percent this year and trades at 10.5 times projected 12-month earnings, a 29 percent discount to the MSCI World Index, according to data compiled by Bloomberg.
The Shanghai Composite lost 2.2 percent and the Hang Seng China Enterprises gauge posted its steepest retreat since Sept. 1. The PMI dropped to 47 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings remained below 50 since March, indicating contraction. Readings of output, new orders and employment all declined at a faster rate, according to the survey, known as the flash PMI. The drop in manufacturing followed data earlier in September showing that overseas shipments fell for a second month.
Citic Securities tumbled 4.4 percent after a Chinese probe found evidence that the nation’s biggest brokerage used advance knowledge of government-orchestrated stock purchases to execute trades that benefited the firm, people familiar with the matter said.

No Notification

A Citic Securities spokeswoman said the company hasn’t received any formal notification regarding the nature of the investigation. The China Securities Regulatory Commission didn’t immediately respond to a request for comment.
All 10 industry groups in the developing-nation index fell, as gauges of technology and industrial companies sank more than 2 percent. Taiwan Semiconductor Manufacturing Co. dropped 3.5 percent in Taipei, the biggest drag in the measure. The Taiex index lost 2.1 percent.
Russia’s Micex Index fell 0.2 percent, its fifth day of declines, poised for the longest losing streak since July 2014. South African stocks climbed 0.9 percent. Equity gauges in South Korea and the Philippines slid at least 1.8 percent, while a gauge tracking 20 developing-nation currencies fell 0.2 percent to a two-week low.
The rand, ringgit and Turkey’s lira declined for a third day and Russia’s ruble was little changed. South Korea’s won slid 1 percent and the rupiah dropped the most since Aug. 12. The Indonesian parliament’s finance commission agreed late on Tuesday to lower the economic growth projection in the 2016 budget to 5.3 percent from 5.5 percent.