Emerging stocks drop for second day as Ukraine tensions escalate

Emerging-market stocks fell for a second day and currencies weakened as Sinopec Shanghai (338) Petrochemical Co. led a drop for material companies while tensions in Ukraine escalated.

Sinopec Shanghai tumbled the most in two weeks in Hong Kong after saying it expects a loss in the first quarter. United Co. Rusal, the world’s largest aluminum producer, slid 3.3 percent in Hong Kong. South Korea’s won, Malaysia’s ringgit and Turkey’s lira dropped at least 0.2 percent against the dollar. Chongqing Changan Automobile Co., Ltd. (200625) surged by the 10 percent daily limit in Shanghai after forecasting higher profit.

The MSCI Emerging Markets Index retreated 0.4 percent to 1,011.82 as of 1:20 p.m. in Hong Kong. Russia and the U.S. traded barbs at an emergency meeting of the United Nations Security Council as a deadline neared for pro-Russian separatists to leave buildings they occupied amid escalating violence in eastern Ukraine.

“Risk aversion is a broad theme today with the Ukraine situation moving to a critical stage,” said Gavin Parry, the managing director of Hong Kong-based brokerage Parry International Trading Ltd.

The emerging-markets gauge has gained 0.9 percent this year and trades at 9.9 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has dropped 1.4 percent in 2014 and is valued at 14.4 times.

All 10 industry groups in the developing-nation gauge fell, led by material producers. Sinopec Shanghai tumbled 5.8 percent, the most since March 28. The company estimated a first-quarter net loss of 70 million yuan ($11.3 million), compared with net income of 172.7 million yuan a year ago.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong sank 0.4 percent, its second day of declines. The Shanghai Composite Index retreated 0.4 percent, halting its biggest weekly rally in eight weeks, as financial and energy companies declined. Chongqing Changan jumped the most since Oct. 11 after saying first-quarter net income may have risen by as much as 274 percent.

The ringgit weakened to a one-week low while the won snapped a four-day gain. The lira declined for a fourth day to the lowest level since April 3. Rusal dropped the most in a month after a three-day rally drove the stock to the highest level since June on April 11.

Russia called the meeting after protests near Slovyansk, about 240 kilometers (150 miles) from the Russian frontier escalated. Camouflaged gunmen fired on Kiev government troops, killing one serviceman and wounding five, the Ukrainian government said.

At the UN, Russia demanded that the U.S. pressure Ukraine to drop the deadline set by acting President Oleksandr Turchynov for protesters to vacate the buildings by this morning Ukraine time. The U.S. said Russia was destabilizing Ukraine and that President Vladimir Putin’s government was telling “fairy tales” in accusing the West of fomenting the unrest.

The Jakarta Composite Index added 0.6 percent, its second day of gains. Benchmark equity gauges in Taiwan and the Philippines slid at least 0.3 percent. India’s stock market is closed for a holiday.