Emerging-market energy shares fell the most in three weeks as oil moved below $45 a barrel, damping appetite for assets of commodity exporters such as Russia and South Africa before central bank meetings in the US and Japan this week.
Lukoil fell for a third day in Moscow and CNOOC declined the most in a month in Hong Kong as Brent crude traded at the weakest level since May on supply concerns. The rouble led declines among developing-nation currencies, losing 1.1% versus the dollar, followed by the South African rand. While assets in emerging Europe were under pressure, Asian currencies advanced and the MSCI Asia Pacific Index increased for a second day on speculation the Bank of Japan will expand stimulus.
Crude’s retreat is undermining one of the biggest drivers of this year’s rebound in developing countries, many of which rely on income from commodities including oil, natural gas and industrial metals to balance their budgets. While emerging-market stocks are on course for their best month since March on speculation the Federal Reserve will keep interest rates lower for longer, wagers for monetary policy tightening have risen in the past week.
“The steadily declining oil price is creating some worries for Russia and makes investors more alert overall,” said Maarten-Jan Bakkum, a senior strategist at NN Investment Partners in The Hague, who favours Indian shares. “On the Fed, nobody really expects them to move toward tightening in the short term. Perhaps there is room for some negative surprises there. That could explain why markets have been weaker.”
Futures show there’s less than a 10% chance the Federal Reserve will boost interest rates when it announces its policy decision today. Odds of an increase by December have risen to 48% from 12% at the beginning of the month.
The MSCI Emerging Markets Index was little changed in London as energy and health-care stocks retreated while utility and technology companies advanced.
Russia’s Micex Index slid 0.6%, as energy majors Lukoil and Rosneft declined at least 1.4% each. Shares in Saudi Arabia lost 0.7% in their sixth day of declines, the longest losing streak since September. Brent crude fell 1%, declining for a fourth day to $44.26 a barrel.
Egyptian shares advanced 0.5%, rising for a third day, after the nation’s currency slumped to a record low in the black market due to the shortage of dollars and speculation grew that the central bank will weaken the official exchange rate.
“The huge drop in the pound is driving people to hedge against inflation that’s expected to rise to record levels,” Sherif Shebl, an equities trader at Pharos Holding for Financial Investments in Cairo. “The economy is badly damaged, so people are buying dollars, equities, real estate, anything to protect themselves.”
The Shanghai Composite Index climbed the most in two weeks, led by consumer companies, amid optimism China’s economy was stabilising. Hong Kong stocks closed at the highest level this year, with gambling companies such as Galaxy Entertainment driving the benchmark gauge on optimism of a revenue turnaround after Chinese travellers to Macau rose from the previous month.

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