Emerging Market Stocks Advance on Stimulus Speculation

Emerging-market stocks jumped the most in two weeks on prospects central bankers from the U.S. and Japan will loosen monetary policy to bolster their economies, stimulating global growth.

The MSCI Emerging Markets Index (MXEF) gained 0.9 percent to 1,024.90 at the close in New York, headed for the biggest gain since March 30. Materials producers jumped the most in almost three months, following commodities higher. Vale SA (VALE5), the world’s largest iron ore producer, gained the most since July 20, 2010, spurring the Bovespa (IBOV)’s best advance since March 13. Chinese stocks (SHCOMP) jumped the most in two months in Shanghai.

Central bankers from the U.S. and Japan indicated they may act to support growth a day after a European Central Bank executive board member triggered speculation the bank will provide support to Spain. Federal Reserve Vice Chairman Janet Yellen endorsed the view that borrowing costs are likely to stay low through 2014 while Fed Bank of New York President William C. Dudley said it’s “still too soon to conclude that we are out of the woods.”

The comments “remind the market of the scope for policy stimulus,” Neil Shearing, chief emerging-markets economist at Capital Economics Ltd. in London, said by phone. “There is speculation of policy stimulus, the ECB doing a bit more in particular. And there were some dovish comments from Japan as well.”

Commodities Climb

Emerging-market stocks have gained 12 percent this year, beating the 8.6 percent advance in developed-country shares. Emerging stocks trade for 10.5 times estimated earnings, lower than the 12.5-times ratio for developed-nation equities on the MSCI World Index.

The Standard & Poor’s GSCI Index of 24 commodities increased 1.2 percent as nickel and zinc led gains.

The IShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF to track developing-nation shares, rose 2.6 percent to $42.81 in New York. 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 7 percent to 27.23.

The Bovespa advanced 2.9 percent as Vale jumped 6.1 percent. Retailer Cia. Brasileira de Distribuicao Grupo Pao de Acucar climbed 4.9 percent, the most in a month, after saying net sales rose 12 percent in the first quarter from last year.

Ricardo Salinas

Voting shares of Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker, plunged 5.3 percent, as Brazil’s antitrust regulator barred rival Cia. Siderurgica Nacional SA from buying more shares in Usinas Siderurgicas.

Grupo Elektra SA (ELEKTRA*), the retail and banking firm controlled by billionaire Ricardo Salinas, dropped 18 percent, the most since October 1997, after stock market rule changes threatened its position on Mexico’s benchmark IPC index.

The gauge of Mexican equities gained 0.5 percent, advancing for a second day.

The FTSE/JSE Africa All Shares Index (JALSH) added 0.5 percent, as BHP Billiton Ltd. (BHP), the world’s biggest resources company, rose 2.3 percent.

India’s Sensex climbed 0.8 percent, the most since March 30, amid speculation that factory output data will prompt the central bank to reduce lenders’ reserve ratios or interest rates next week to boost economic growth.

Rocket Launch

India’s statistics office reported today that factory output grew 4.1 percent in February, missing the 6.7 percent median estimate in a Bloomberg survey.

South Korean equities fell 0.4 percent amid concern its northern neighbor will conduct a rocket launch in the coming days. North Korea has begun fueling for a launch of a rocket to put a satellite in orbit sometime between April 12 and 16, South Korea’s Yonhap News agency reported on April 11, citing space agency official Paek Chang Ho as telling a group of foreign journalists in the capital of Pyongyang. An intelligence report

The Shanghai Composite Index rallied 1.8 percent before data tomorrow that may show China’s economy grew 8.4 percent in the first quarter, the slowest pace since 2009, according to the median of economists’ estimates compiled by Bloomberg.

“We expect the batch of heavyweight activity data due on 13 April to remain perplexing in appearance, but weakening in nature,” Benoit Anne, head of emerging-markets strategy at Societe Generale SA in London, said in a note to clients, in which he forecast Chinese growth of 8.1 percent. “In light of the data, the authorities are likely to continue to respond with cautious and selective easing.”

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell eight basis points, or 0.08 percentage point, to 353, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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