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Emerging stocks fall as yuan weakens

Emerging-market stocks fell, snapping a two-day advance, as an increase in Chinese money-market rates spurred concern global economic growth will falter. The yuan weakened to the lowest level in 11 months.

Bloomberg News reported that the MSCI Emerging Markets Index dropped 0.3 per cent to 949.86 in New York.

China’s overnight money-market rate jumped to a one-month high, while the yuan retreated below 6.20 per dollar for the first time since April and property companies spurred a slide in stocks. Russia’s Micex Index led declines among major developing-nation equity benchmarks.

Stock traders have doubled bearish bets against some of the biggest Chinese property developers amid concern that a weaker real-estate market will curb sales as borrowing costs increase. Weaker growth in China and emerging markets has become the main concern among global investors, according to a Barclays Plc survey.

About 84 per cent of the investors polled expect China won’t meet its official growth target of 7.5 per cent this year.

The surge in Chinese borrowing costs doesn’t “bode well for emerging markets,” Peter Sorrentino, a senior portfolio manager who helps manage about $4.7bn at Huntington Asset Advisors in Cincinnati, said by phone. “That casts a pall over China’s ability to deliver its advertised growth rate.”

Stocks also fell before a Federal Reserve policy announcement. The United States central bank will press on with cuts to bond-buying and switch to qualitative guidance for assessing interest rates, according to economists surveyed by Bloomberg.

The iShares MSCI Emerging Markets Index exchange-traded fund slid one percent to $39.03. The premium investors demand to own emerging-market debt over US Treasuries fell 0.05 percentage point to 317 basis points, according to JPMorgan Chase & Co.

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