- The Washington Times - Wednesday, September 17, 2008

Emerging-market stocks plunged the most in 11 years, currencies fell and the cost of insuring developing-nation bonds surged as rising lending rates and tumbling commodities prompted investors to sell riskier assets.

Every emerging stock market in MSCI indexes retreated, except Brazil, Argentina and Indonesia. Russia’s Micex Index fell the most since Bloomberg began tracking the measure in May 2001, led by financial companies OAO Sberbank and OAO VTB Group, before trading was suspended. South Korea’s won dropped the most in a decade. Argentina’s five-year credit-default swaps rose to the highest since at least June 2005.

The MSCI Emerging Markets Index fell 4.7 percent to 786.99, the lowest level since October 2006. The measure earlier tumbled 6.3 percent for the biggest drop since October 1997. The measure lost 34 percent in 2008 before Tuesday, compared with a 19 percent decline for the Standard & Poor’s 500 Index.

Bank borrowing costs in dollars more than doubled to the highest since 2001 after credit downgrades of American International Group Inc. and the collapse of Lehman Brothers Holdings Inc. led banks to hoard cash. Crude oil, copper, silver and sugar tumbled on concern that losses in the financial system will further curb global economic growth and cut demand for raw materials.

“Sentiment is very poor,” said Nick Field, who helps oversee $27 billion in emerging-market equities at London-based Schroders PLC. “Emerging stocks are suffering because of the funding problems in the developing market banking system and also because people have to cover losses elsewhere and they’re selling whatever stocks they can.”

Russia’s Micex Index plummeted 17 percent to 881.17, dragged down by a 28 percent plunge in Sberbank and a 31 percent decline in VTB Group. Korea’s Kospi Index fell 6.1 percent, while Czech’s PX Index slumped 5.6 percent.

Energy shares, including Russian oil producers OAO Gazprom and OAO Rosneft, declined after crude tumbled more than $3 a barrel. Gazprom, the world’s biggest natural gas producer, lost 18 percent to 158.41 rubbles. Rosneft, Russia’s largest oil company, sank 22 percent to 132.20 rubbles.

In Latin America, Brazil’s Bovespa reversed earlier losses, rising 1.7 percent, led by Petroleo Brasileiro SA and miner Cia. Vale do Rio Doce. Brazil’s real also rebounded from its lowest level since November, ending the day little changed.

The MSCI Latin America Index rebounded from a year-low in early trading, gaining 0.8 percent. Argentina’s Merval rose 0.6 percent. Chile’s Ipsa fell 1.7 percent.

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