Emerging-market stocks rose, erasing earlier losses, as investors bet that the prospect of new political leadership in Greece and Italy may help to end the region’s debt crisis and bolster global growth.
The MSCI Emerging Markets Index gained 0.2 percent to 991.18 at 9:48 a.m. New York time after falling as much as 0.7 percent earlier today. Brazil’s Bovespa index rose 1.2 percent as companies linked to domestic demand jumped on bets interest rates may be reduced. Mexico’s benchmark added 0.4 percent and Hungary’s BUX gauge slid 0.5 percent. China’s Shanghai Composite Index retreated 0.7 percent, the most in two weeks.
Italy’s parliament will vote on the 2010 budget report today amid an unraveling of Berlusconi’s parliamentary majority and a surge in the nation’s borrowing costs. Greek Prime Minister George Papandreou agreed to step down as a new government is created to secure international financing.
“Everybody is waiting to see what will happen in Italy, whether Berlusconi will resign or not,” said Daniel Lenz, chief emerging markets strategist at DZ Bank AG in Frankfurt. “There needs to be a strong political commitment on installing the necessary fiscal austerity measures, because the market is expecting far more than what has happened now.”
The MSCI’s developing-nation index has dropped 14 percent this year, more than the 5.7 percent slide in the MSCI World Index of developed countries. The emerging-market gauge trades at 10.6 times estimated earnings, less than the 12 times for the MSCI World, according to data compiled by Bloomberg.
Two Berlusconi allies defected to the opposition last week, and a third quit last night. Six others called for Berlusconi to resign and seek a more broadly backed government in a letter to newspaper Corriere Della Sera. Berlusconi said yesterday he was confident he still had a majority.
Investor concern about Italy’s ability to cut the region’s second-biggest debt load sent the yield on the nation’s 10-year bonds to 6.5 percent today. That’s the highest in 14 years and close to the 7 percent level that drove Greece, Ireland and Portugal to seek bailouts. European finance chiefs will meet in Brussels today to work on details of a plan to bulk out the region’s bailout fund.
OTP Bank Plc., the biggest lender in Hungary, declined for a fifth day toward a one-month low. The stock fell 0.3 percent.
The Czech Republic’s PX slumped 1.2 percent and Poland’s WIG20 Index added 1.6 percent.
South Korea’s won led emerging-market currencies lower, sliding 0.6 percent against the dollar. The Chilean peso declined 0.4 percent while the ruble rose 0.8 percent.
“Central and eastern European, Middle Eastern and African markets remain heavily affected by developments in the eurozone and for this reason it is difficult to expect a meaningful and/or longer-lasting rally anytime soon,” Bartosz Pawlowski, a currency and fixed-income strategist at BNP Paribas SA in London, wrote in a report to clients today.
CPFL Energia SA, Brazil’s largest private-sector power distributor, gained 3.5 percent after it was rated “outperform” at Banco Itau BBA SA. Embraer SA rose 1.5 percent after saying it received 10 firm orders for its Embraer 190 and Embraer 195 jets from CIT Group Inc.
Cnooc Ltd. (883), China’s biggest offshore energy explorer, sank 2.2 percent in Hong Kong after a deal to buy Argentina’s biggest oil exporter collapsed. The failure of the deal means Cnooc may struggle to meet its production growth targets next year, according to Gordon Kwan, Mirae Asset Securities Ltd.’s head of regional energy research in Hong Kong.
Seoul Semiconductor Co., which makes light-emitting diodes products, surged by the daily limit of 15 percent after the official Xinhua News Agency reported China plans to phase out incandescent light bulbs.
Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones that earned about a fifth of its revenue from Europe last year, fell 1.2 percent from a nine- month high. The European Union said Samsung and Apple Inc. were questioned by its antitrust regulators over the use of smart- phone patents. South Korea’s Kospi stock Index fell 0.5 percent.
Kepco Engineering & Construction jumped 15 percent after Yonhap News reported that Turkish Prime Minister Recep Tayyip Erdogan had asked for South Korea’s participation in setting up a nuclear plant. Kepco Engineering designs power plants.
In Taipei, HTC Corp. (2498) gained 2 percent after the smartphone maker’s October sales rose 39 percent from a year earlier.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries dropped four basis points, or 0.04 percentage point, to 388, 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 rose eleven basis points, or 0.11 percentage point, to 301, according to data provider CMA.
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