Emerging market stocks hit three-week low on Russia, Greece and China

Emerging-market stocks registered their biggest drop in three weeks as China's battling with speculative trading intensified and a fear grew the conflict between Russia and Ukraine is pushing their economies into a crisis. The ruble and Russian Eurobonds tumbled.

Greek bank-deposit outflows accelerated to record levels last week, while Standard & Poor’s said it may cut Greece’s credit rating, already five levels below investment grade, should the new government fail to get further financial support. Ukraine plans to restructure its bonds, raising concern it’s unable to raise funds to meet its liabilities. Venezuela’s bonds have lost 20 percent this month, the most in emerging markets, as the country reels under a shortage of dollars.

In China, the securities regulator will extend its scrutiny of margin-lending practices to 46 firms, after an initial 45 were checked, the state-run Xinhua News Agency reported. Margin-based borrowing, which can magnify losses for investors when shares fall, rose to a record on Shanghai’s exchange this week. Citic Securities Co. and Haitong Securities Co. declined in Shanghai.

The MSCI Emerging Markets Index lost 1.3 percent to 971.44 at 12:20 p.m. in London. The gauge has advanced 1.6 percent this month, the best start to a year since 2012, as the European Central Bank unveiled a $1.25 trillion bond-purchase plan and countries from India to Turkey cut interest rates.

The Russian currency weakened 1.9 percent to 69.33 versus the dollar, extending its slide this month to 12 percent. The yield on Russia’s international bonds due in March 2030 climbed seven basis points to 7.44 percent, extending the increase this week to 54 basis points, says Bloomberg. The dollar-denominated RTS Index of equities fell 1 percent. OAO TMK fell 1.5 percent after its French peer Vallourec SA announced a $1.4 billion writedown because of plunging oil prices.

The drop in Russian assets came before European Union foreign ministers meet in Brussels to discuss expanding sanctions on the country for the escalation in the fighting in eastern Ukraine.

The Turkish lira fell for a fifth day, losing as much as 1.4 percent to a record of 2.4181 against the dollar, after Turkey’s central bank said it may hold an emergency meeting next week to lower interest rates again. Policy makers cut the main rate 50 basis points to 7.75 percent on Jan. 20.

Alpha Bank AE, Eurobank Ergasias SA and National Bank of Greece SA rallied at least 14 percent today, as the FTSE/Athex Banks Index rebounded from its worst drop on record yesterday.

According to Daniele Nouy, head of the ECB’s Supervisory Board, Greek lenders are capable of surviving market turbulence as a lot of “good work” has gone into strengthening their balance sheets.