Emerging Stocks Slump on China as Gazprom to Vale Tumble

Emerging-market stocks retreated from a five-month high amid concern China's economic growth will falter after the nation's money-market rates climbed. OAO Gazprom and Vale SA drove a slump in commodity producers.

The MSCI Emerging Markets Index declined 1.1 percent to 1,033.47, snapping a rally that took the gauge to a five-month high. The Shanghai Composite Index fell 1.3 percent, while Gazprom drove Russia's Micex Index to the biggest slide in two months. Brazil's Ibovespa (IBOV) retreated from the highest since March as iron-ore producer Vale sank. The rand fell as South Africa projected government debt would surge.

Stocks in emerging markets joined a decline in commodities as crude oil tumbled to a three-month low, while copper and gold slumped. China's benchmark money-market rate jumped the most since July as the central bank refrained from adding funds to markets and corporate tax payments drained cash. The People's Bank of China may lean toward tightening should there be an acceleration in consumer-price gains, Song Guoqing, a central bank academic adviser, said over the weekend.

"People do interpret that as a sign that the Chinese government is trying to reign in borrowing, and borrowing is seen as a key engine of their economy," Peter Jankovskis, who helps oversee $3.5 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said by phone. "That could certainly be pressuring commodity prices, and that's being reflected in other equity markets as well."

All 10 groups in the MSCI Emerging Markets Index fell as commodity companies dropped at least 1 percent. The benchmark gauge for developing nations has fallen 2.1 percent this year to trade at 10.7 times projected earnings, compared with the valuation of 14.3 for the MSCI World Index.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund sank 2.3 percent to $42.64. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, advanced 12 percent to 21.58.

The Ibovespa dropped 1.8 percent as iron-ore producer Vale SA (VALE5), whose main export market is China, snapped a two-day gain. Pulp producer Fibria Celulose SA (FIBR3) retreated after posting quarterly earnings that trailed analysts' estimates. Brazil plans to sell dollar bonds due in 2025, creating a new benchmark security in international markets, and buy back notes maturing in as little as four years.

Russia's Micex Index dropped the most since Aug. 15 as natural-gas export monopoly Gazprom, which has the heaviest weighting on the gauge, sank 2.3 percent. Benchmark indexes in Turkey, Poland and the Czech Republic fell at least 0.8 percent.

South Africa

The FTSE/JSE Africa All Shares Index fell from a record in Johannesburg after the National Treasury said gross debt will balloon to 48 percent of gross domestic product in the year through March 2017 from an estimated 43 percent last year.

China's stocks fell, with the benchmark index for smaller companies capping the biggest two-day loss in 18 months. Leshi Internet Information & Technology (Beijing) Co., the operator of online-video portal LeTV.com, plunged by the 10 percent daily limit for a second day. Huaneng Power International Inc. (902), the listed unit of China's largest power group, slumped 5.8 percent after third-quarter earnings missed estimates.

India's S&P BSE Sensex (SENSEX) dropped to a one-week low as quarterly results disappointed investors. Wipro Ltd. (WPRO), the nation's third-largest software exporter, fell from a 13-year high as Morgan Stanley said the company's sales growth trailed that of its peers. Cairn India Ltd, which runs India's biggest onshore oilfield, slid the most in two months after its profit missed forecasts.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell two basis points, or 0.02 percentage point, to 312 basis points, according to JPMorgan Chase & Co.