Emerging market stocks headed for the biggest drop in at least two decades and exchanges in Russia and Brazil were forced to halt trading as the global banking crisis escalated in Europe and oil fell below $90 a barrel.
Brazil’s Bovespa index tumbled 10 per cent, while Russia’s Micex Index plunged 18 per cent before trading was halted for a second time on Mondy. Indonesia and Saudi Arabia lost the most in at least six years. The MSCI Emerging Markets Index slumped 8.2 per cent, leaving it poised for the biggest slide ever.
Financial shares tumbled worldwide as BNP Paribas SA agreed to take control of Fortis after a government rescue failed, and German state and financial institutions put together a 50 billion-euro ($68 billion) rescue package for Hypo Real Estate Holding AG.
Russian authorities grappling with the worst financial turmoil since the government’s debt default in 1998 have pledged more than $150 billion for banks and companies through loans and tax benefits.
Russia’s stock market decline along with China and Brazil has pushed the benchmark MSCI emerging market gauge down 44 per cent this year, the steepest drop in at least two decades. Stocks included in the index are valued at 10.1 times earnings, the cheapest since 1998, data compiled by Bloomberg show.
Russia’s Micex was down 16.7 per cent at 770.21, its lowest level since October 2005, before trading was halted for the second time.
The ruble fell for an eighth day to its weakest level in 18 months against the dollar at 26.2043.
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Russia’s economy is “vulnerable’’ as the credit crisis worsens, with retailers and developers the most at risk, said Andrei Sharonov, managing director at Troika Dialog, Russia’s oldest investment bank.
“This problem is not only for financial institutions, but for the whole of industry, for the whole economy,’’ Sharonov, a former deputy economy minister, said in a television interview in Moscow on Monday. “Many companies feel these problems with debt financing.’’
Stocks tumbled in Europe and Asia and US index futures dropped, while Treasuries advanced. The extra yield investors demand to own developing-nation bonds instead of US Treasuries widened 20 basis points to 4.58 percentage points, a four-year high, according to JPMorgan Chase & Co.
Crude oil dropped below $90 a barrel in New York for the first time since Feb on concern that slowing global economic growth will reduce demand for fuel.
Saudi Arabia’s Tadawul All Share Index, which was closed since September 28, fell the most in at least 14 years, losing 9.8 per cent. Indonesia’s Jakarta Composite Index dropped 10 per cent to 1,648.74, the biggest loss since the 2002 terrorist attack, on the first day of trading after a four-day holiday.
China’s benchmark CSI 300 Index slid 5.1 per cent, its biggest one-day decline since August, after resuming trading on Monday after a week-long holiday. The index has lost 60 per cent this year, the world’s second-worst performer, on concern the credit crisis and the Chinese government’s measures to tame inflation will slow economic growth.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 5.8 per cent to 11,801.70, its lowest since September 2006. ICICI Bank, India’s second-biggest lender, fell 2.4 per cent and Bank of China dropped 4.9 per cent. Turkey’s benchmark index fell 7.9 per cent, its biggest decline since May 2006.