Emerging-market stocks advanced, sending a benchmark index to the highest in a week, after the U.S. reported faster-than-expected growth in the second quarter and German lawmakers approved the expansion of a European rescue fund.
The MSCI Emerging Markets Index added 0.4 percent to 894.48 by 4:33 p.m. in New York, the highest since Sept. 21. Brazil’s Bovespa Index rose 0.2 percent and Mexico’s IPC Index gained 0.7 percent. Turkey’s ISE National 100 Index (XU100) increased 1.3 percent, and South Korea’s Kospi Index (KOSPI) climbed 2.7 percent. The benchmark in India increased 1.5 percent while that in China fell 1.1 percent.
The U.S. economy expanded 1.3 percent last quarter, Commerce Department figures showed today. That’s more than the 1.2 percent forecast of economists surveyed by Bloomberg and a 0.4 percent growth in the prior quarter. Germany’s lower house of parliament passed a proposal by Chancellor Angela Merkel’s government today to expand the powers of the European Financial Stability Facility, an euro-region rescue fund. The legislation is set to a non-binding vote in the upper house tomorrow.
“Emerging-market equities are pricing in significant recession risk in the developed world,” said John Lomax, an emerging-markets strategist at HSBC Holdings Plc, in an e-mailed response to questions. “Better-than-expected U.S. numbers and an increasing chance of stronger European policy action are helping to reduce these risks.”
The MSCI emerging-market index has fallen 22 percent this year, compared with a 12 percent slide in the MSCI World (MXWO) Index. Shares on the developing-nation gauge are trading at 10 times trailing earnings versus 12 times for stocks in developed nations. Concern Greece will default on its debt is dragging global equities and commodities toward their biggest quarterly losses since 2008.
The plan approved by German lawmakers today will allow the EFSF to buy bonds of distressed states and offer emergency loans to governments, raising Germany’s guarantees to 211 billion euros ($288 billion) from 123 billion euros.
“Investors appear to be pinning their hopes on the German vote on the euro-area rescue fund,” said Im Jeong Jae, a Seoul- based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion. “They seem to be betting that the region’s debt troubles, though there will be sporadic bumps, will eventually be resolved.”
Banco Santander Brasil SA, the Brazilian unit of Spain’s biggest bank, gained 1.5 percent to 14.45 reais as Chief Executive Officer Alfredo Saenz said the bank’s profit will “return to normal” in the next three years as revenue from emerging markets drives growth. Cia. de Concessoes Rodoviarias, Brazil’s biggest toll-road operator, advanced 2.8 percent after it was raised to “buy” from “neutral” at Banco BTG Pactual.
OHL Mexico SAB, the local unit of Spanish construction company Obrascon Huarte Lain SA, jumped 4.4 percent in Mexico City, the most among stocks in the IPC benchmark measure.
The Mexican peso depreciated 1.1 percent versus the dollar, the worst performance among 25 emerging-market currencies. Russia’s ruble fell 0.8 percent and India’s rupee weakened 0.5 percent. Poland’s zloty strengthened 0.7 percent against the U.S. dollar, the best gainer among the developing-nation currencies.
Russia’s Micex Index advanced 2.2 percent, led by OAO Sberbank with a 5.5 percent gain. The BUX gauge in Hungary advanced 1.2 percent, led by Magyar Telekom Nyrt., the country’s former phone monopoly.
Turkiye Garanti Bankasi AS (GARAN) rose 1.7 percent to 7.36 liras, extending this week’s gains to 8.2 percent. Turkey’s stocks are being bolstered by speculation the country will see more rating upgrades, said Mine Yoruk, a trader at Erste Securities in Istanbul. Standard & Poor’s lifted the country’s local-currency debt to investment grade on Sept. 20.
Commodity producers slid amid concern slower growth in China will reduce demand for raw materials.
Fifty-nine percent of respondents to a Bloomberg poll said China’s gross domestic product, which rose 9.5 percent last quarter, will gain less than 5 percent annually by 2016. China is the world’s largest consumer of commodities from copper to zinc and iron ore.
Jiangxi Copper Co. fell 2.7 percent in Shanghai trading and PT Bumi Resources, Asia’s biggest exporter of power-station coal, sank 5.9 percent in Jakarta. CLSA Asia-Pacific Markets cut the stock to “underperform” from “buy,” saying the Indonesian company’s plan to reduce debt is progressing more slowly than expected.
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