Emerging stocks rose, capping the benchmark index’s strongest first quarter in 20 years, as resilient U.S. growth boosted global optimism and Europe committed funding to ease the sovereign credit crisis.
The MSCI Emerging Markets Index (MXEF) gained 0.9 percent to 1,041.45 at the close in New York, nearly erasing the benchmark’s weekly loss. The MSCI gauge has jumped 14 percent since the end of 2011, the best first quarter since 1992, as information technology and industrial companies led gains. The measure of equities from 21 emerging countries trades for 10.3 times estimated earnings, below the 11.4 average ratio over the past five years, and the 12.3 level for developed-nation stocks.
U.S. consumers increased spending in February by the most in seven months, showing the largest part of the country’s economy is strengthening, after employers capped the best six months of employment gains since 2006, pushing the jobless rate to a three-year low. European leaders today agreed to fresh rescue lending that put the size of a firewall to contain the continent’s sovereign debt woes at 800 billion euros. Earlier this month, Greece’s private creditors agreed to a debt swap that paved the way for a bailout.
“Going into this year, with the Europe situation deteriorating, many people looked at emerging markets as too much” of a risky play, Andres Garcia, global market strategist who helps oversee $323 billion in assets at JPMorgan Chase & Co.’s mutual funds division, said by phone from New York. “Even though they have seen a significant rally since October or November of last year, the valuation story is still at reasonable levels.”
The MSCI gauge fell to an eight-week low yesterday as profit from Chinese companies including Jiangxi Copper Co. (600362) trailed estimates. Its 3.5 percent decline in March was the worst monthly performance since November.
Health Care, Energy
The emerging-market measure’s advance today ended a two-day slide, as health care and consumer staples companies led gains. Brazil Pharma SA (BPHA3) rose 5.4 percent to a record high in Sao Paulo. United Co. Rusal (RUALR), the world’s largest aluminum producer, surged 3.4 percent, pushing Russia’s benchmark Micex index higher. Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. each advanced 1.6 percent in Hong Kong after reporting that profit rose.
Brazil’s Bovespa (IBOV) fell 0.6 percent, cutting its rise this year to 14 percent, still the best quarterly performance since the third quarter of 2010. Mexico’s IPC (MEXBOL) benchmark advanced 1 percent as central bank minutes published today showed policy makers are considering cutting interest rates. The gauge’s 3.1 percent advance this week is the strongest since the five days ended Dec. 2.
The IShares MSCI Emerging Markets Index (EEM) exchange-traded fund, the most-traded ETF that tracks developing-nation shares, rose 0.7 percent to $42.95, for gains this quarter of 13 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a gauge of options prices on the fund and expectations of price swings, fell 1.8 percent to 26.09.
Emerging-market stock funds took in $25.6 billion in the first quarter through March 28, the best start to a year since 2006, according to EPFR Global. In the same period last year, investors pulled $23.7 billion from emerging-market funds.
OAO Transneft (TRNFP), Russia’s national oil-pipeline operator, gained 3.3 percent and the Micex jumped 1.5 percent. The benchmark for Russian equities has gained 8.2 percent this year, after a 17 percent slide in 2011.
Turkiye Halk Bankasi AS (HALKB), a state-run Turkish bank, added 2.4 percent in Istanbul. Halkbank, as the lender is known, was raised to buy from hold at Deutsche Bank AG. Global Yatirim Holding AS (GLYHO), a group with interests in financial services and energy, jumped 3.4 percent after saying it received preliminary bids for the sale of minority stakes in its energy unit. The nation’s ISE National 100 Index (XU100) rose 1.4 percent, boosting its gain this year to 22 percent.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong gained 1 percent. The BSE India Sensitive Index (SENSEX), or Sensex, advanced 2 percent, pushing its three-month advance to 13 percent, for the first quarterly gain in five.
Quanta Computer Inc. (2382), the world’s largest contract maker of laptops, surged 6.9 percent in Taipei to the highest since April 2002, after reporting that fourth quarter net income more than doubled.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell eight basis points, or 0.08 percentage point, to 338 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index. The measure has declined from 426 basis points on Dec. 30, and averaged 363 basis points over the past 12 months before today.
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