Emerging Markets Equities Advance to Three-Month High on Earnings Outlook

Emerging-market stocks gained, sending the benchmark index to its highest since April, as technology companies beat profit estimates and speculation rose the Federal Reserve may extend efforts to boost the economy.

The MSCI Emerging Market Index climbed 0.5 percent to 1,015.99 by 5 p.m. in New York, the largest rally in a week. Developing-nation bonds advanced, sending the extra yield investors demand to hold the securities over U.S. Treasuries 17 basis points lower to 2.58 percentage points, the biggest drop since May 27, according to JPMorgan Chase & Co.’s EMBI+ Index. The Brazilian real led currency gains, strengthening 0.6 percent against the dollar.

Chimei Innolux Corp., Taiwan’s largest maker of liquid- crystal displays, and Winbond Electronics Corp. rose more than 6 percent after reporting earnings that beat analyst projections. Last week’s report showing a steep drop in U.S. nonfarm payrolls has strengthened speculation the Fed may announce stimulus measures to boost growth when it sets monetary policy this week.

“Expectations have been rising that the Fed will add further stimulus to the economy,” Christopher Weafer, the Moscow-based chief strategist at UralSib Financial Corp., wrote in an e-mailed note. “Better-than-expected earnings reports from major corporations across Asia, Russia” and in the European Union and U.S. have also supported markets, he said.

The 21-country MSCI emerging index has increased 11 percent this quarter, giving it a gain of 2.7 percent this year.

Micex Rallies

“We’re doing quite well, in terms of profit growth,” said Lye Thim Loong, who helps manage $500 million at Avenue Invest Bhd. in Kuala Lumpur. “While there’s some fear that eventually there will be a slowdown, based on earnings, everything seems to be doing well.”

Brazil’s Bovespa equity index fell 0.3 percent, as concern global economic growth is slowing overshadowed speculation that Brazilian borrowing costs will rise less than previously estimated. Brazilian Retailer B2W Cia. Global do Varejo tumbled after its rating was cut at HSBC Holdings Plc.

Russia’s Micex Index advanced 1.2 percent, its biggest gain in a week, after higher metals and oil prices boosted OAO GMK Norilsk Nickel and OAO Lukoil. China’s Shanghai Composite Index rose 0.5 percent, while India’s Bombay Stock Exchange Sensitive Index increased 0.8 percent.

Indian stocks may climb by about 15 percent to a record by March as earnings and economic growth lure investors, Sudhakar Shanbhag, chief investment officer of Kotak Mahindra Old Mutual Life Insurance Ltd., said in an interview in Mumbai.

Taiwan’s Taiex index advanced 0.9 percent to 8,034.49, its highest closing level since April 29. Indonesia’s Jakarta Composite Index climbed for a fourth day, rising 0.7 percent.

Sri Lanka Slump

Romania’s leu strengthened for a second day after a report showed industrial output growth accelerated to an annual 4.7 percent in June, from 4.1 percent in May and 3 percent in April.

Sri Lanka’s benchmark equity index tumbled for a third day, posting the world’s biggest decline, after the exchange imposed a 10 percent limit on daily stock moves. The country’s Colombo All-Share Index slumped 4 percent, the most since January 2009.

The bourse on Aug. 5 set a 10 percent daily trading band on stocks. The All-Share gauge is still up 44 percent this year.

“The market is still feeling the after-effects of last week’s price-band announcement; it seems liquidity has dried up in the speculative favorites,” said Channa Amaratunga, a director at CT Capital Ltd. “Other shares are falling as traders try to make good settlements and margin calls. Maybe it’s the case that the market also needed a reality check.”

To contact the reporters in this story: Michael Patterson in London at mpatterson10@bloomberg.net; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

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