Emerging-Market Stocks Advance as Federal Reserve Boosts Stimulus Measures
Emerging-market stocks rose the most in three weeks, currencies strengthened and borrowing costs fell to the lowest level since April after the U.S. Federal Reserve boosted its asset-purchase plan by $600 billion to spur growth.
The MSCI Emerging Markets Index advanced 1.7 percent to 1,151.26 at 9:55 a.m. in New York, heading for the highest closing level since June 9, 2008. South Africa’s rand led gains in developing-nation currencies, appreciating 2 percent against the dollar. The extra yield investors demand to own emerging- market bonds over U.S. Treasuries dropped 4 basis points to 2.32 percentage points, JPMorgan Chase & Co.’s EMBI+ Index showed.
The MSCI stock index climbed for a sixth straight day after the Fed said it will purchase about $75 billion of Treasuries a month because of “disappointingly slow” progress in boosting economic growth, according to a statement yesterday. Fifty-three of 56 economists surveyed by Bloomberg News predicted the central bank would announce asset purchases, with 29 forecasting a pledge to buy $500 billion or more.
Slow economic growth and easy monetary policies in the developed world will keep “financial markets awash with liquidity,” Philip Poole, the global head of macro and investment strategy at HSBC Global Asset Management in London, wrote in an e-mailed note today. “This combination is likely to prove positive for risk assets.”
Faster Growth
The MSCI stock index has surged 16 percent this year and JPMorgan’s index of returns on developing-nation debt jumped 17 percent as investors poured money into emerging-market equity and debt funds at a record pace, according to EPFR Global data.
While central banks in the U.S., Europe and Japan step up efforts to boost their flagging economies, developing nations are poised to expand at a 7.1 pace percent this year, the fastest since 2007, International Monetary Fund forecasts show.
India’s Bombay Stock Exchange Sensitive Index jumped 2.1 percent today to a record close. Coal India Ltd. rallied 40 percent in its trading debut after selling $3.4 billion of shares in the nation’s largest initial public offering last month. Benchmark equity gauges in China, Thailand, Turkey, Poland and Hungary, South Africa, Mexico and Brazil increased more than 1 percent.
The rand strengthened to an almost three-week high versus the dollar. The currency has rallied 39 percent since the start of 2009 as near-zero interest rates in developed nations encouraged investors to borrow cheaply to invest in South Africa, which has a 6 percent benchmark rate.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net.
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