Emerging Stocks Drop to Seven-Week Low on Syria Concern

Emerging-market stocks fell to a seven-week low and currencies in India and Turkey sank to records as speculation grew that the U.S. will take military action in Syria.

Stocks in the Philippines led declines as the benchmark index tumbled to an eight-month low on concern capital outflows will accelerate. India's rupee plunged the most in two decades as a surge in oil threatened to worsen the current-account deficit, while the Turkish lira sank to the lowest level since at least 1981. Russia's sale of 10-year bonds flopped after the government offered yields below what investors demanded.

The MSCI Emerging Markets Index dropped 0.4 percent to 911.40 at 1:22 p.m. in New York. Rising tension in Syria has worsened a rout that erased more than $1 trillion from the value of developing-nation equities this year. Foreign investors pulled about $2.4 billion this month from markets in India, Indonesia, Thailand and the Philippines amid speculation that the Federal Reserve will reduce monetary stimulus.

"The tensions in the Middle East and the threat of imminent military action are casting a pall over the equity markets," Alan Gayle, senior strategist at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $48 billion. "The global concerns about Syria and higher oil prices continue to weigh."

Eight of 10 groups in the MSCI Emerging Markets Index fell today, led by health-care shares. The gauge of developing nations extended this year's plunge to 14 percent, compared with an 11 percent advance for a measure of developed markets.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.9 percent to $37.70. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, retreated 4.5 percent to 27.28.

Brazil's Ibovespa snapped a two-day drop as Brookfield Incorporacoes SA led homebuilders higher. The real climbed as the central bank's effort to support the currency offset demand for a refuge in the U.S. dollar.

The Micex Index (INDEXCF) slid for a fourth day as OAO Rostelecom, Russia's biggest fixed-line operator, was downgraded at Bank of America Merill Lynch. The Finance Ministry shelved the sale of 12.6 billion rubles ($379 million) of January 2023 securities as only one bidder participated. The government had offered the debt at a yield of 7.7 percent to 7.75 percent, while the rate increased to 7.79 percent by yesterday's close.

The lira lost 1.2 percent to the lowest level since when Bloomberg started tracking the data.

South Africa

The FTSE/JSE Africa All Shares Index fell 1.8 percent, the most since July 5. Discovery Ltd. (DSY), South Africa's largest medical-insurance provider, sank 9.1 percent after saying profit will be as much as 10 percent lower than the previous period.

The Philippine Stock Exchange Index dropped 3 percent, extending a monthly drop to 14 percent. SM Investments Corp., owner of the largest shopping-mall operator and biggest grocery chain, slid 7.5 percent to the lowest price since October. The Jakarta Composite Index rose 1.5 percent.

India's S&P BSE Sensex (SENSEX) rebounded from the lowest intraday level in almost a year as some traders closed bearish bets before derivatives contracts expire tomorrow. Reliance Industries Ltd., the owner of the world's largest refining complex, gained 1.1 percent. The rupee slumped 3.9 percent to an unprecedented 68.8450 per dollar in Mumbai.

China's stocks fell from a two-week high as PetroChina Co. (601857) dropped after four senior managers were removed amid a government anti-corruption campaign and drugmakers slid on concern earnings are trailing estimates.

The premium investors demand to own emerging-market debt over U.S. Treasuries slid 0.05 percentage point to 352 basis points, according to JPMorgan Chase & Co.