Emerging Stocks Gain for Fifth Day on Recovery Outlook, Metal Price Rally
Emerging-market stocks advanced, lifting the benchmark gauge for a fifth day, after President Barack Obama’s agreement to extend tax cuts fueled hopes of a sustained recovery and as gold and copper set record highs.
The MSCI Emerging Markets Index rose 0.6 percent to 1,132.66 as of 10:45 a.m. in London, after rallying 4.7 percent in the previous four days. China’s Shanghai Composite Index climbed 0.7 percent. Russia’s Micex Index advanced 1.4 percent.
Jiangxi Copper Co. added 2.4 percent in Hong Kong and Shanghai and KGHM Polska Miedza SA gained in Warsaw as the metal jumped to a record high in London. Obama’s move offset concern that Europe’s sovereign-debt crisis may spread.
“Obama extending tax cuts should help support the economic recovery,” said Terrace Chum, who helps manage about $6 billion at MFC Global Investment Management in Hong Kong. “Investors are still mindful of policy tightening for China. That will set the tone for the market.”
Obama said he’ll agree to a two-year extension on all Bush- era tax cuts in a compromise deal he called “an essential step on the road to recovery.” European Union countries are set to give formal approval to the aid package for Ireland announced Nov. 28 while the Irish parliament will vote today on its budget, which must be passed for the aid to go into effect.
The Shanghai Composite earlier fell as much as 1.7 percent after the China Securities Journal said a “window” for the People’s Bank of China to increase borrowing rates may open this weekend.
Jiangxi Copper gained for a fifth day in Hong Kong. Copper for three-month delivery rose as much as 2.5 percent to a record high of $8,988.25 a metric ton on the London Metal Exchange.
OAO Polymetal, Russia’s largest silver producer, surged as much as 20 percent, the most in more than two years, and last traded 4.5 percent higher at 651 rubles, after billionaire Mikhail Prokhorov said he may merge OAO Polyus Gold with a global competitor as early as next year. Polyus gained 3.5 percent to 1,864.96 rubles.
The stocks were also buoyed by a jump in silver to a 30- year high, while gold rose to a record $1,428.55 an ounce in London, on concern that cash injections by policy makers to boost the U.S. and European economies will weaken currencies, increasing the appeal of precious metals as an alternative.
The Hungarian forint appreciated 0.7 percent against the euro, retracing some of its 1.2 percent slump yesterday when Moody’s Investors Service downgraded the nation’s debt to one step above junk.
The ruble strengthened 0.2 percent to 31.2225 per dollar.
The difference between the return investors demand from emerging-market debt and U.S. Treasury bonds narrowed 12 basis points to 2.34 percentage points, according to the JPMorgan Chase & Co. EMBI+ index.
The Bombay Stock Exchange’s Sensitive Index retreated 0.2 percent. State Bank of India, the nation’s biggest lender, led a decline in financial stocks after increasing the rate it pays customers for deposits by as much as 1.5 percentage points. The nation’s economic expansion of 8.9 percent for a second straight quarter is bolstering demand for credit amid a near-record funds shortage in the banking system.
“Banks are stretching their balance sheets to the limit to fund this credit growth,” Suresh Ganapathy and Mudit Painuly, analysts at Macquarie Group Ltd, wrote in a report yesterday. “Banks may become desperate for deposit growth and are likely to enter into a deposit rate ‘war.’”
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