Emerging stocks drop on China curbs

Emerging-market stocks fell as regulatory efforts to curb speculative trading in China dragged the nation’s shares from a 2008 high. The ruble slid as the central bank raised the cost of borrowing dollars.

China CNR Corp. and CSR Corp. plunged from records in Hong Kong and the Shanghai Composite Index declined the most in seven weeks.

The rupee headed for its biggest slump this year after India’s trade deficit widened. Poland’s zloty rallied past 4 per euro after better-than-expected industrial output data. The ruble tumbled 3.1 percent against the dollar.

The MSCI Emerging Markets Index retreated 0.9 percent to 1,033.67 by 2:14 p.m. in London on Monday. China’s securities regulator announced steps on Friday to clamp down on the use of shadow financing for equity purchases and increase shares available for short sellers. That overshadowed a step by the People’s Bank of China to cut reserve requirements by the most since 2008 to shore up the economy after growth slowed to a six-year low.

“China’s regulator announced some measures on Friday, which were interpreted negatively,” Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki, said. “Because Shanghai and also lately Hong Kong have performed so well, short-term investors take some profits. I would expect the trend to stay positive medium term.”

Stocks in Shanghai have traded at a 14-day relative strength index above 70 since March 17 as bets the government will announce stimulus sent the index up 79 percent in six months, the most among 93 benchmark gauges tracked by Bloomberg.

An index tracking 20 developing-nation currencies decreased 0.4 percent as currencies in India and Turkey lost at least 0.8 percent against the dollar, while Brazil’s real was little changed.

The rupee declined 0.9 percent to 62.9162 per dollar and the S&P BSE Sensex Index lost 2 percent as Infosys Limited led software exporters lower. The nation’s trade gap reached $11.8 billion in March as overseas shipments dropped 21.1 percent from a year earlier, official figures showed after the end of trading on Friday.

The lira is trading within 1.1 percent of a record low as investor confidence in Turkish assets declines before an election in June. The nation’s central bank will keep interest rates on hold at a policy meeting on Wednesday, according to the median estimate of 23 analysts in a Bloomberg survey.

Nine out of 10 industry groups in the MSCI Emerging Markets Index decreased, led by industrial companies. PetroChina Co. retreated from a seven-month high as the Hang Seng China Enterprises Index dropped the most sinceJanuary 19. China CNR and CSR tumbled at least 11 percent.

The Shanghai Composite lost 1.6 percent. Chinese authorities banned a source of financing for margin trades. The reserve-requirement ratio will be cut 1 percentage point from Monday, the People’s Bank of China said on Monday.

The developing-nation gauge has rallied 8.1 percent this year, driving its 12-month projected earnings estimate to 12.4 times, near a five-year high, according to data compiled by Bloomberg. That’s still a 26 percent discount to developed-country shares in the MSCI World Index.