Emerging Stocks Trim Gain as Commodity Drop Sinks Brazil

Emerging-market stocks fell, paring a weekly advance in the benchmark index, as declines in commodity producers overshadowed gains in Chinese banks.

OAO Rosneft (ROSN), Russia's biggest oil producer, slumped as crude dropped. Bank of Communications Co. rose to a two-month high in Hong Kong after the Chinese lender reported earnings that beat analysts' estimates. The rand weakened for the first time in four days after South Africa's central bank said more borrowing and higher inflation risked sending bond yields higher. Steelmaker Usinas Siderurgicas de Minas Gerais SA sank in Sao Paulo after its first-quarter net loss more than doubled.

The MSCI Emerging Markets Index slid 0.5 percent to 1,022.36, trimming its gain for the week to 1.1 percent. Stocks joined commodities lower as a data showed the U.S. economy grew less than forecast, while confidence among American consumers declined to a three-month low. The Standard & Poor's GSCI index of 24 commodities pared its biggest weekly rally since February.

The U.S. growth number "was a mild disappointment," Christopher Orndorff, who helps oversee $450 billion as a senior portfolio manager at Western Asset Management Co. in Pasadena, California, said by phone. Commodities were affected by concern about Europe and demand coming from region, he said.

About 55 percent of companies in the MSCI Emerging Markets Index that posted quarterly profits have trailed estimates, according to data compiled by Bloomberg. The index lost 3.1 percent this year, trailing an 8.9 percent increase in the MSCI World Index of developed-country stocks. The emerging-markets measure trades at 10.7 times 12-month projected profit, compared with the MSCI World's valuation of 14.2.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, dropped 1 percent to $42.24, snapping its longest stretch of gains since December. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 1.5 percent to 18.88.

Brazil's Ibovespa slipped 1.3 percent as Usiminas sank 5.3 percent. Fibria Celulose SA, the world's largest pulp producer, dropped 6.6 percent.

The Mexican IPC index declined 1.5 percent as Corp. Geo SAB, Mexico's second-biggest homebuilder by revenue, plunged 28 percent as the company said it would miss an interest payment and that cash tumbled by 84 percent during the first quarter.

Rosneft dropped 1.1 percent in Moscow, while United Co. Rusal, the world's largest aluminum producer, slid 1.6 percent. Moscow's Micex Index (INDEXCF), which was little changed today, surged 2.5 percent this week. Benchmark stock gauges in Poland and Turkey advanced, while Hungarian stocks fell. Stocks in the Czech Republic dropped a second day.

Chinese Stocks

The Shanghai Composite Index lost 1 percent to the lowest level since December, while the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong capped a third straight day of gains. South Korea's Kospi Index (KOSPI) fell 0.4 percent. India's S&P BSE Sensex slid for the first time in five days, losing 0.6 percent.

Bank of Communications, China's fifth-largest lender, rose 0.8 percent and Bank of China Ltd. added 1.4 percent in Hong Kong after posting record quarterly profits as they boosted income from loans and fee-based services.

BYD Co., the Chinese automaker partially owned by Warren Buffett's Berkshire Hathaway Inc., soared 12 percent in Hong Kong after saying first-half profit may surge 31-fold.

Baidu Inc., owner of China's largest Internet search engine, sank 7.9 percent in New York, the most since Feb. 5, after net income trailed estimates.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose three basis points, or 0.03 percentage point, to 297 basis points, according to JPMorgan Chase & Co.'s EMBI Global Index.