Emerging Market Stocks Post Biggest Weekly Retreat in 7 Years

By William Mauldin

Oct. 3 (Bloomberg) -- Emerging-market stocks had the biggest weekly decline in seven years, led by banks and energy companies as commodity prices dropped on speculation the U.S. is headed for a recession.

The MSCI Emerging Markets Index dropped 2.3 percent to 741.73, after a 3.4 percent decline yesterday. The index lost 10 percent this week, the most since the September 2001 terrorist attacks.

``Investors are running from emerging markets because they're thinking a slowdown in the U.S. and developed markets will have a much greater effect on their own economies,'' said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow. ``U.S. consumers are using about a million barrels less of oil a day than they were 18 months ago, and the U.S. financial sector is bringing money back home, taking a lot of cash out of emerging markets and commodities.''

Turkey's benchmark index fell the most in three weeks, losing 4.2 percent to 34,553 in the first trading day since Sept. 29. Russia's Micex Index slumped 5.3 percent, extending its annual loss to 51 percent.

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, had a weekly decline of 10 percent, the most since at least 1956. The index has slumped 31 percent from a record on July 3.

India, Russia

India's Sensex index slid 4.1 percent to 12,526.32. Reliance Industries Ltd., India's biggest company by market value, slumped 7.6 percent, to its lowest in a year.

The Philippine Stock Exchange Index fell 1.8 percent to 2,566.21 at the close in Manila, the most since Sept. 18. Banco de Oro Unibank Inc., the nation's No. 2 lender by value, fell 2.6 percent.

VTB Group, Russia's second-biggest lender, fell 5.5 percent, to 4.57 kopeks on the Micex Stock Exchange. The bank said it lost 9.31 billion rubles ($360 million) in September due to ``negative market dynamics.''

Russia suspended trading for two days and pledged more than $150 billion in emergency funding last month as the seizure in capital markets, falling oil prices and a five-day war with Georgia in August drove away investors. About $58.9 billion has left the country since Aug. 8, according to BNP Paribas SA.

OAO Rosneft, Russia's biggest oil producer, fell 7 percent to 143.22 rubles, a seventh day of declines.

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.