Emerging Stocks Rally From 1-Year Low on China, Fed Speculation
Emerging-market stocks rose the most in six days, lifting the benchmark index from a one-year low, as a report showed China’s manufacturing may contract at a slower pace and investors speculated the Federal Reserve will take further steps to bolster the U.S. economy.
The MSCI Emerging Markets Index climbed 2 percent to 985.80 at 4:31 p.m. in New York, the biggest increase since Aug. 15. Brazil’s Bovespa Index snapped a three-day losing streak. Mexico’s benchmark rose to a three-week high. China’s Shanghai Composite Index advanced 1.5 percent, Taiwan’s Taiex climbed 3.3 percent and South Korea’s Kospi jumped 3.9 percent. Turkey’s ISE National 100 Index (XU100) slid 1.6 percent as the central bank left reserve requirements unchanged.
Industrial and raw-materials companies rallied after the preliminary reading for a Chinese manufacturing index released by HSBC Holdings Plc and Markit Economics rose to 49.8 in August from a final reading of 49.3 for July. Shares are rebounding before central bankers meet this week in Jackson Hole, Wyoming, where Fed Chairman Ben S. Bernanke’s hint of a second round of asset purchases a year ago helped spur a 25 percent rally in the MSCI emerging-market index.
“Some investors appear to be using hopes of more measures in the U.S. as an excuse to grab oversold stocks,” said Lim Chang Gue, a fund manager in Seoul at Samsung Asset Management Co., which oversees about $30 billion. “Still, I’m not too optimistic about whether another round of asset purchases could translate into an economic recovery.”
The MSCI emerging-market index has tumbled 13 percent in August, set for its worst month since October 2008. The measure is down 14 percent this year, dragging valuations to 9.8 times estimated profits for the next 12 months, according to data compiled by Bloomberg. The MSCI World Index of developed markets has lost 9.6 percent this year and is valued at 11.1 times forecast earnings, the data show.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined two basis points to 369, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Bovespa rose after Brazilian Finance Minister Guido Mantega said creating conditions to cut interest rates is a “priority” in a senate hearing. Lower interest rates would be “very healthy” because they would cut the cost of servicing the nation’s debt, he said.
Fifty-eight stocks in the benchmark index rose while eight fell. Gerdau SA, Latin America’s largest steelmaker, jumped 6 percent, and Braskem SA, Latin America’s largest petrochemicals producer, gained 3.8 percent, following commodity prices higher.
Poland’s zloty appreciated 1.2 percent versus the dollar while the Hungarian forint climbed 1.1 percent, the first and second-best performers among emerging-market currencies. Brazil’s real strengthened 0.7 percent against the greenback while Russia’s ruble gained 0.5 percent.
The Shanghai Composite Index rose the most since July 4 as the PMI report eased concerns China’s economic slowdown is deepening. Yunnan Copper Industry Co. (000878) gained 1.7 percent, while Tongling Nonferrous Metals Group Co. advanced 2.6 percent.
The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa rose six basis points to 264, according to CMA in London. A basis point is 0.01 percentage point.
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