(Bloomberg) -- Emerging-market stocks snapped a two-day advance as Chinese shares tumbled to a 13-month low on concern outflows will accelerate as the economy slows. Meanwhile, Russia's ruble swung between gains and losses.
The Shanghai Composite Index slid more than 6% after data showed outflows from China reached a record $1 trillion last year, more than seven times higher than in 2014. Russia's ruble erased losses as oil rebounded while South Korea's won and Brazil's real weakened. The premium investors demand to own developing-nation debt rather than U.S. Treasuries rose for a second day.
"The inability to control capital outflows is the typical sign of crisis in emerging markets," said Nathan Griffiths, a senior emerging-market equities manager who helps oversee $1.2 billion at NN Investment Partners in The Hague, who prefers Indian and Mexican shares. "Given the importance of China to both emerging markets and the global economy, a China crisis would be pretty horrible."
China's outflows in December increased by almost $50 billion from a month earlier, highlighting the battle facing policy makers trying to hold up the yuan amid the slowdown, according to estimates compiled by Bloomberg Intelligence. Growth in the world's second-largest economy is seen dropping further in 2016 from the weakest pace since 1990 last year, damping prospects for exports from countries such as Brazil and South Korea that count China among their biggest trading partners.
The MSCI Emerging Markets Index fell 1.2% to 707.35 as of 1:40 p.m. in London, extending this year's slide to 11%. Six of the gauge's 10 industry groups declined more 1%.
Benchmarks in South Korea and the Philippines lost more than 1% and Brazil's equity-index futures slid 1.8%. Economists covering the Latin American country estimated its economy will contract 3% this year, more than the previously forecast 2.99%, according to a central bank survey published Monday.
The Shanghai Composite Index dropped 6.4% to 2,749.785 and the Hang Seng China Enterprise Index of mainland equities listed in Hong Kong fell 3.4%. Huang Weimin, whose Chinese stock-index futures wagers returned more than 6,200% last year, says the Shanghai gauge could decline another 15% in the first half as slowing economic growth and a weaker yuan spur capital flight.
Tuesday's loss was the steepest since Jan. 7, when the Shanghai gauge plunged 7%, the second selloff of more than 6% in a week that prompted the government to cancel its circuit-breakers program after four days. Stocks dropped even as the People's Bank of China injected 440 billion yuan ($67 billion) into the financial system using reverse-repurchase agreements, the most in three years.
The won declined 0.8% after a report showed South Korea's economy expanded 0.6% last quarter from the previous three months, when it increased 1.3%. Brazil's real slipped 0.3%.
The ruble gained 1.3% after opening lower and then paring losses as oil rose 0.8%. The currency's 30-day correlation with oil was at 0.77 on Tuesday, near the highest since October, according to data compiled by Bloomberg. A value of 1 would mean the two are trading in lockstep. Mexico's peso also slid with oil, losing 0.3%. Oil lost 0.9% in New York, falling for a second day.
The premium investors demand to own emerging-market debt over U.S. Treasuries widened four basis points to 472, according to JPMorgan Chase indexes.
China's sovereign bonds fell on speculation the central bank is reluctant to use measures such as cutting lenders' reserve-requirement ratios that might weaken the currency. The 10-year yield climbed nine basis points to 2.87%.
The People's Bank of China added 440 billion yuan ($67 billion) to the financial system on Tuesday via reverse-repurchase agreements. The biggest injection in three years was aimed at preventing a shortage of cash as demand picks up before the Lunar New Year Holidays that start in the second week of February.
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