Emerging Stocks Snap Four-Day Loss on Easing Greek Concerns, Valuations
Emerging-market stocks snapped a four-day drop on speculation the Greek government will survive a parliamentary vote of confidence and as the cheapest valuations in more than two years lured investors.
The MSCI Emerging Markets Index rose 1 percent to 1,109.33 at 10:57 a.m. in London, rebounding from the lowest level in more than three months. South Korea’s Kospi Index (KOSPI) increased 1.4 percent, and China’s Shanghai Composite Index climbed from a nine-month low. Turkey’s ISE National 100 Index (XU100) advanced 1 percent and Russia’s Micex Index gained 0.6 percent as oil rose.
Greek Prime Minister George Papandreou’s government faces a confidence vote tonight after he reshuffled his cabinet and replaced his finance minister. Papandreou must win approval for additional austerity measures to obtain emergency funding from the European Union and the International Monetary Fund and avoid default. Concern the Greek debt crisis will spread has dragged valuations on MSCI’s emerging-market index down to about 10.7 estimated profits, the lowest level since March 2009.
“Today’s key event will be the confidence vote in the Greek government -- expected around 1900 EST -- with risk rallying overnight on rising optimism that the government will be victorious,” analysts at RBC Capital Markets including Robert Beange in London wrote in a note to clients today. “Success in the confidence vote could see a further short-term rally in risk.”
The Greek vote caps a week of turmoil for Papandreou, who fended off a revolt from the ranks of his ruling socialist Pasok party in parliament last week. MSCI’s emerging market gauge has lost 3.7 percent this year, compared with a 0.5 percent gain for the MSCI World (MXWO) Index of developed shares.
Asian Trade Data
Stronger-than-forecast trade data in Thailand and Taiwan helped strengthen emerging-market currencies, pushing the Korean won 0.6 percent higher against the dollar. The ruble appreciated by 0.5 percent as oil jumped as much as 1.6 percent in New York in a second day of increases.
OAO Sberbank, the biggest lender in Russia, the world’s leading energy exporter, gained 1.1 percent in Moscow and OAO Gazprom, the world’s largest natural gas exporter, rose 0.9 percent.
The FTSE/JSE Africa All Share Index rose 0.6 percent in Johannesburg as gold and copper prices increased.
Shinhan Financial Group Co. led a rally by South Korean banks, advancing 4.4 percent. KB Financial Group Inc. (105560) rallied 5.4 percent and Woori Finance Holdings Co. surged 4.8 percent. Bank stocks are “undervalued” and loan growth, especially for small- and medium-sized companies, may improve in the second half, Daewoo Securities said.
China Shares
Anhui Conch Cement Co. jumped 4.3 percent in Shanghai and a gauge of real estate stocks rose 1.1 percent after the Shanghai Securities News said local governments will be allowed to sell bonds to fund public-housing construction.
China Construction Bank Corp. (939) fell 2.3 percent in Hong Kong. Bank of America Corp. may sell some of its $21 billion stake in the China bank to bolster capital, said three people briefed on the plans.
Vietnam’s VN Index rose 2.6 percent, the most in Asia, on speculation inflation may rise at a slower pace this month after consumer prices decelerated in the nation’s two biggest cities.
The Dubai Financial Market General Index rose 0.4 percent after Joe Kawkabani, Franklin Templeton Investments (ME) Ltd.’s chief investment officer of equities in Dubai, said the United Arab Emirates’ improved securities settlement system may help MSCI Inc. (MSCI) boost the nation to emerging-market status.
MSCI Decision
MSCI Inc. is scheduled is due to announce its decision on the upgrade at 10 p.m. London time.
South Korea and Taiwan, Asia’s biggest emerging markets after China and India, will retain their MSCI classifications as emerging markets because the index compiler’s requirements for upgrades haven’t been met, according to Bank of America’s Merrill Lynch.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 4 basis points, or 0.04 percentage point, to 318 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps fell four basis points to 200.
-- Editors: Linda Shen, Ana Monteiro
To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net.
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.
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