Emerging Market Stocks Strengthen as Bernanke’s Speech Boosts Confidence
Emerging-market stocks rose, driving the benchmark index to its first weekly gain in five, as Federal Reserve Chairman Ben S. Bernanke stopped short of signaling further stimulus to aid the economy, easing investors’ concern about the outlook for growth.
The MSCI Emerging Markets Index gained 0.3 percent to 975.92 at 5:41 p.m. in New York, after dropping as much as 0.5 percent in the first five minutes following Bernanke’s speech today at an annual Fed symposium. Brazil’s Bovespa Index rose 0.8 percent while Mexico’s benchmark advanced 0.4 percent. Turkey’s ISE National 100 Index (XU100) climbed 1.4 percent after the trade deficit narrowed from a month earlier and Russia’s Micex Index added 1.1 percent.
Bernanke sought to reassure investors that U.S. growth is sound in the long run, and that the Fed still has tools to aid the recovery if needed. He didn’t signal the Fed will move ahead with a third round of asset purchases. The U.S. economy grew less than previously estimated in the second quarter, climbing at a 1 percent annual rate from April through June.
“What no action will do is give confidence to investors that things are not as bad as many people perceive, otherwise he would’ve acted,” Keith Springer, the president of Springer Financial Advisors in Sacramento, California, said in a phone interview. “Investors will eventually see the positives.”
The MSCI index has gained 0.6 percent during the past five trading sessions, the first weekly advance since the period ended July 22.
Range of Tools
“In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” Bernanke said to central bankers and economists gathered in Jackson Hole, Wyoming.
He said that while the slumping housing market and financial-market volatility still pose challenges for the economy, his view of the long-term outlook is “more optimistic.”
Equity funds investing in developing nations posted $2.1 billion of outflows in the week ended Aug. 24, Citigroup Inc. said in a report today. Withdrawals slowed from $2.8 billion the previous week, analysts led by Markus Rosgen said, citing figures compiled by EPFR Global.
B2W Cia. Global do Varejo, Brazil’s largest online retailer, jumped 5.1 percent as traders increased bets that policy makers will cut interest rates for the first time in more than two years at next week’s monetary policy meeting. OGX Petroleo & Gas Participacoes SA, the Brazilian oil company controlled by billionaire Eike Batista, rose 2 percent.
Mexican Rate Unchanged
Grupo Financiero Banorte SAB de CV (GFNORTEO), Mecixo’s fourth-largest bank by outstanding loans, surged 5.1 percent, the most since June 2010. The nation’s central bank kept its benchmark interest rate at a record low today and signaled it may lower borrowing costs to safeguard domestic growth.
OAO GMK Norilsk Nickel, the world’s largest producer of the metal, soared 5.3 percent in Moscow, following metal prices higher. That was the biggest daily gain since December.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 3.68 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index.
Emerging-market currencies were mixed. The Czech koruna strengthened 1.6 percent versus the dollar, the best performer among 25 emerging currencies. The South African rand followed with a 1.3 percent gain. The Indian rupee, as well as the Colombian peso, weakened 0.2 percent.
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