Emerging-Market Stocks Rise for Fifth Day on Recovery, Stress Test Result

Emerging-market stocks gained for a fifth day and currencies strengthened after South Korea’s economy grew faster than analysts estimated and most European banks passed stress tests assessing their strength of capital.

The MSCI Emerging Markets Index climbed 0.4 percent to 985.48 as of 5 p.m. in New York, bringing its five-day rally to 4.3 percent. South Korea’s won appreciated 0.7 percent against the dollar while the Polish zloty rose 0.9 percent versus the euro. The extra yield on developing-nation debt over U.S. Treasuries dropped seven basis points, or 0.07 percentage point, to 283 basis points, the lowest since May 13, according to JPMorgan Chase & Co.’s EMBI+ Index.

South Korea’s gross domestic product expanded 1.5 percent in the second quarter from the previous three months, compared with the 1.3 percent median forecast in a Bloomberg survey of economists. The MSCI gauge for Eastern Europe climbed 1.9 percent after the stress test results that Credit Suisse Group AG said were “mildly positive.”

“I am bullish for the second half,” Steve Bernstein, chief executive officer and senior managing director of Oppenheimer Investments in Asia, said in a Bloomberg Television interview. “The second half of the year is going to be focused more on what happens in Europe and in the U.S.”

South Korea’s Kospi Index of shares advanced 0.6 percent. LG Electronics Inc., the country’s second-largest electronics maker, advanced 4.2 percent after JPMorgan raised the stock’s rating to “overweight” from “neutral.” Korea Life Insurance Co. climbed 3.3 percent.

Stress Test

The MSCI EM Eastern Europe Index climbed to its highest closing level since May 13 after European regulators said July 23 that of 91 European Union banks subjected to stress tests, only seven failed, with a combined capital shortfall of 3.5 billion euros ($4.5 billion). The tests “achieved a sufficient level of rigor to be taken seriously,” Credit Suisse analysts led by Daniel Davies wrote in a report dated July 23.

Russia’s Micex Index advanced 1.2 percent. OAO Rosneft, the country’s largest oil producer, surged 3.4 after it said second- quarter profit advanced 60 percent on higher oil prices and output.

Brazil’s Bovespa stock index rose for a sixth day, the longest streak since April, after economists pared their bets for central bank interest-rate increases.

Tele Norte Leste Participacoes SA surged the most in two months amid speculation Portugal Telecom SGPS SA may invest in the Brazilian phone company, known as Oi. MRV Engenharia & Participacoes SA led a rally by homebuilders amid speculation borrowing costs will rise more slowly.

China, India

The Shanghai Composite Index increased 0.7 percent, climbing for a sixth day in the longest winning streak since November 2009. Aluminum Corp. of China Ltd. gained 6.4 percent, the most in four months, on expectations China’s plan to limit metal output will benefit bigger producers.

Maruti Suzuki India Ltd. tumbled 12 percent, the biggest loss among the 756 members in the MSCI global gauge for developing nations, after the country’s biggest carmaker reported the first drop in net income in five quarters. India’s benchmark Bombay Stock Exchange Sensitive Index, or Sensex, lost 0.6 percent.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net.

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