Emerging-Market Stocks Rise on Earnings, Global Growth Outlook

Emerging-market stocks rose, with the benchmark index rebounding from its biggest drop in a month on speculation earnings and the global economy will withstand a possible slowdown in Japan.

The MSCI Emerging Markets Index gained 0.7 percent to 1,185.9 as of 12:17 p.m. in London, after yesterday’s 1.9 percent retreat. South Korea’s Kospi Index (KOSPI) jumped 1.6 percent, while India’s Bombay Stock Exchange Sensitive Index increased 2.3 percent and China’s Shanghai Composite Index added 1 percent. Turkey’s ISE National 100 Index gained 0.9 percent, while Russia’s Micex was little changed.

South Korean and Chinese automakers led the advance on speculation they will benefit from disruptions for counterparts in Japan, where last month’s record earthquake prompted the government to cut its assessment of the economy for the first time in six months. Economists forecast a report today will show U.S. retail sales improved. Airlines gained after oil prices plunged the most in four weeks in New York yesterday.

“There’s growing consensus that certain markets will benefit from the calamity in Japan,” said Jonathan Ravelas, chief market strategist at Manila-based Banco de Oro Unibank Inc. “The global recovery won’t be as robust as everyone would like, but there’s no tangible evidence at this point that we won’t see any growth this year.”

Yield Spread

The MSCI gauge of developing nations has gained 3 percent this year, pushing valuations to 11.6 times estimated earnings. The measure’s multiple was at 13 times a year ago.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined 4 basis points to 2.53 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa fell 1 basis point to 184, according to data provider CMA in London.

Hyundai Motor Co. (005380), South Korea’s biggest carmaker, rallied 6.3 percent to a record high in Seoul trading, while Kia Motors Corp. (000270) jumped 4.6 percent to the highest since March 1998. Toyota Motor Corp., the world’s largest automaker, said it would halt some vehicle production in Europe and warned its U.S. dealers of a possible tightening in vehicle supply.

“Hyundai and Kia are expected to expand sales in the U.S. as Toyota will likely continue to struggle with supply shortage,” said Kim Byung Kwan, a Seoul-based analyst at Mirae Asset Securities Co. “Toyota’s sales likely won’t normalize until the first quarter of next year.”

Airlines Rally

Geely Automobile Holdings Ltd. (175), a unit of the Chinese automaker that owns Volvo Cars, surged 7.2 percent in Hong Kong, the biggest gain since Oct. 25. The company said sales rose 33 percent in March from a year earlier, and increased 14 percent in the first quarter.

Air China Ltd. (601111), the world’s biggest airline by market value, increased 6.3 percent, the sharpest advance since Feb. 14, after crude prices dropped in New York yesterday. AirAsia Bhd. (AIRA), Southeast Asia’s biggest budget carrier, gained 1.6 percent in Kuala Lumpur, steepest increased since March 31.

Crude oil for May delivery dropped 3.3 percent yesterday, extending a 2.5 percent loss the previous day on the New York Mercantile Exchange, as U.S. stockpiles of the fuel increased and after Goldman Sachs Group Inc. forecast a “substantial” correction in prices of the fuel. Oil was little changed today.

U.S. retail sales gained 0.5 percent in March, following a 1 percent increase in February, according to a survey ahead of Commerce Department figures today.

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editor responsible for this story: Reinie Booysen at rbooysen@bloomberg.net

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