Emerging market stocks drop on Greece

Emerging-market stocks fell to a four-month low on concern Greece will exit the single European currency and amid speculation China's cut in banks' reserve requirements won't be enough to stem an economic slowdown. China Longyuan Power Corp., the nation's largest wind-power developer, slumped 11 per cent after proposing to issue new shares. The Philippine Stock Exchange Index sank 1.4 per cent amid speculation a dispute with China over territory may hurt trade relations between the two countries. The MSCI Emerging Markets Index dropped 1 per cent to 961.58 in Hong Kong, headed for its lowest close since January 16. The gauge has fallen 11 per cent from its March 2 high on concern the European debt crisis and slowing Chinese economy will hamper a global economic recovery. The People's Bank of China announced on Saturday that it is cutting the amount of cash that banks must set aside as reserves for a third time since Nov-ember, pumping money into the financial system to support lending. Reserve ratios will fall 50 basis points, effective May 18. "I am surprised that they have waited so long and done so little," Dariusz Kowalczyk, a Hong Kong-based senior economist and strategist at Credit Agricole, said in a Bloomberg Television interview yesterday, referring to China's reduction in reserve ratios. "A rate cut would help but I think what really needs to happen is fiscal stimulus. They need to push for infrastructure products in particular because these would be the quickest to the real economy." The Micex Index slid 1 per cent in Russia, declining for a third day, as oil fell 1.2 per cent in New York. The WIG20 Index slipped 1.1 per cent in Poland, which sends most of its exports to the euro region. The ISE National 100 Index retreated 0.5 per cent in Turkey and the FTSE/JSE Africa All Shares Index slipped 0.4 per cent in Johannesburg, as mining stocks retreated. The MSCI Emerging Markets Index last week declined for an eighth straight week, its longest stretch of losses since 2008. The gauge is valued at 10.2 times estimated profit, compared with the MSCI World Index's multiple of 12.1 times. Greece's political deadlock looked set to continue for a second week as President Karolos Papoulias failed to secure agreement on a unity government. Meetings brokered by Papoulias were set to continue yesterday after Syriza, the largest anti-bailout party, rejected a unity government following last week's inconclusive elections. The Shanghai Composite Index fell 0.6 per cent, the lowest close since April 19, as brokerages from Citigroup Inc. to JPMorgan Chase & Co. cut their economic growth forecast for the country.