Emerging Market Equities Climb, Led by Consumer Shares on Profit Outlook

Developing-nation stocks rose, sending the MSCI Emerging Markets Index to a five-month high, as consumer and technology shares advanced amid signs corporate earnings growth will weather a U.S. economic slowdown.

Tsingtao Brewery Co., the Chinese beermaker, jumped 5.2 percent in Shanghai after an adviser to China’s central bank said the nation needs to increase domestic consumption. Taiwan Semiconductor Manufacturing Co., the world’s largest custom manufacturer of chips, climbed 1.3 percent in Taipei after placing two orders for equipment. Energy Development Corp. led Philippine equity gains after Deutsche Bank AG said the benchmark index will surpass its record high on earnings growth.

The MSCI gauge of 21 developing countries rose 0.8 percent to 1,044.18, with a measure of consumer discretionary stocks rising the most among 10 industry groups. The Philippine Stock Exchange Index, the best performer among the 15 biggest Asia Pacific markets this year, increased 1.9 percent. South Africa’s FTSE/JSE Africa All Share Index climbed 1.1 percent. Brazil’s Bovespa index rose 1.6 percent.

“Funds are shifting away from developed markets to emerging economies,” said Paul Joseph Garcia, who manages $1.7 billion as chief investment officer at the Manila unit of ING Investment Management Ltd. “Corporate earnings and economic prospects in emerging markets are better than in developed markets.”

Bovespa Record

Flows into emerging-market equity funds and high-yield bonds reached a six-week high in the week to Sept. 15 as higher risk appetite sustained a global rally, EPFR Global said last week. Developing-nation equity funds received about $3.3 billion as Chinese industrial output gains bolstered sentiment, EPFR said. Flows into Asia excluding-Japan equity funds hit a seven- week high.

Brazil’s Bovespa stock index will gain 16 percent to a record 78,000 by yearend as “obstacles” are removed, including presidential elections and Petroleo Brasileiro SA’s share sale, Goldman Sachs Group Inc. said.

The central bank’s signal that it will hold borrowing costs through 2010 also boosts the prospects for Brazilian stocks, Stephen Graham and Andre Rezende, analysts at Goldman Sachs in Sao Paulo, wrote in a note to clients today. The benchmark equity gauge may rally 31 percent to 88,000 by mid-2011, they said.

The Federal Reserve is likely to lower its forecasts for U.S. economic growth at tomorrow’s meeting, Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co., wrote in an opinion piece published on Pimco’s website.

Consumption

China needs to increase domestic consumption to help survive in a global economic environment that is growing more challenging, Li Daokui, an adviser to the People’s Bank of China, said at a financial forum in Beijing yesterday.

India’s benchmark Sensitive Index advanced 1.6 percent. Reliance Communications Ltd., the nation’s second-largest mobile-phone operator, jumped 5.3 percent.

The Jakarta Composite index lost 0.4 percent. PT Bank Mandiri, Indonesia’s biggest bank by assets, fell 4.4 percent, the most in three months. The nation’s central bank said on Sept. 17 it may require lenders to disclose their prime-lending rates each month starting November to boost competition.

Mol Nyrt. led Hungary’s BUX index 1.2 percent lower as oil declined.

To contact the reporter on this story: Jack Jordan in London at jjordan22@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.