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Most Emerging Stocks Rise on Taiwan, China Policy Speculation

Most emerging-market stocks rose after Taiwan said it may exempt some overseas investors from a possible capital-gains tax on stock trades and on speculation China will ease monetary policy to bolster economic growth.

KGI Securities Co. rallied by the daily limit after China Development Financial Holding Co. (2883) bid as much as NT$54.6 billion ($1.9 billion) for the brokerage. Taiwanese carriers gained after the nation’s aviation authority said it’s considering fuel surcharges on domestic routes. LG Innotek Co. slid 2.7 percent after Dongbu Securities Co. said its light-emitting diode business won’t be profitable anytime soon. Chinese lenders extended losses after Premier Wen Jiabao said China needs to break a banking “monopoly” of a few big lenders.

The MSCI Emerging Markets Index (MXEF) added less than 0.1 percent to 1,037.48 as of 3:50 p.m. Seoul time, with 166 companies rising and 104 stocks falling. Most markets are shut for holidays. The gauge has declined 0.4 percent this week, headed for its third straight weekly drop. Taiwan’s Taiex index rose 0.9 percent today, the most in Asia. The Shanghai Composite Index (SHCOMP) added 0.2 percent and is up 4.9 percent this year on expectations the central bank will lower lenders’ reserve requirements and cut borrowing costs after tightening monetary policy in the previous two years to tame inflation.

“Expectations of lower reserve requirements for banks in China linger on,” said Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees $28 billion. “With many markets shut, investors are in a wait-and-see mode especially ahead of the U.S. job market data.”

Taiwan Rebounds

The MSCI Emerging Markets Index has fallen for the past three weeks amid signs of a slowdown in China and renewed concerns Europe won’t contain its debt crisis. Still, the gauge has advanced 13 percent this year, outpacing the 9 percent advance in the MSCI World Index of developed nations.

The gauge of developing countries is valued at 10.6 times estimated profit, compared with the MSCI World’s earnings multiple of 12.6 times.

South Korea’s Kospi index rose less than 0.1 percent and Malaysia’s FTSE Bursa Malaysia KLCI Index added 0.4 percent. Markets including India, Thailand and Indonesia are closed today.

Taiwan’s benchmark index climbed the most since March 22 as Finance Minister Christina Liu said overseas investors without offices and direct business operations in Taiwan will be exempt “in principle” from a capital-gains tax on stock trades that the government is deliberating.

KGI Bid

The Taiex (TWSE) Index yesterday slumped to a two-month low and the currency weakened after the chairman of the stock exchange said the island will probably impose a capital-gains tax on share transactions.

KGI Securities surged 6.6 percent, the most since Jan. 30. China Development offered NT$5.5 in cash and 1.2 of its own shares for each share of KGI Securities, valuing the transaction at NT$16.71 per share, the Taipei-based company said in an exchange filing yesterday after the market closed. That’s 47 percent higher than KGI’s closing price of NT$11.40 in Taipei yesterday. EVA Airways Corp. (2618), Taiwan’s second-largest carrier, jumped 5.9 percent in Taipei, while China Airlines Ltd. (2610) added 4.9 percent. Taiwan’s Civil Aeronautics Administration is considering introducing a fuel surcharge for domestic flights, the authority said by e-mail.

Banks Slide

Industrial & Commercial Bank of China Ltd., the biggest lender, slipped 0.2 percent to 4.29 yuan, while largest rival Construction Bank declined 1.3 percent to 4.73 yuan.

In Seoul, LG Chem Ltd. (051910) advanced 2.6 percent as investors bet the biggest South Korean chemicals maker’s earnings recovery will accelerate this quarter.

Second-quarter operating income may rise 38 percent from the previous quarter to 775.8 billion won ($687 million), according to Tong Yang Securities Inc. That compares with an estimated 12 percent profit gain in the first quarter, the brokerage said.

LG Innotek slid to its lowest level since Feb. 28 after Dongbu Securities Co. said the company’s LED business is unlikely to swing to profit this year.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Allen Wan at awan3@bloomberg.net

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