Emerging-market stocks rose to a one- week high after China’s first interest rate cut since 2008 fueled speculation more central banks will take steps to boost economic growth.
The MSCI Emerging Markets Index climbed 1.2 percent to 913.18 at the close in New York. The gauge has advanced 3.5 percent in the past three days, the biggest gain since February. Information technology companies rose the most since Feb. 15 as Samsung Electronics Co. (005930) jumped 5.2 percent in Seoul and Cielo SA, Brazil’s biggest card-payment processor by market value, added 2.3 percent to lift the Bovespa. (IBOV) Russia’s Micex index rose to a three-week high in Moscow.
China’s one-year deposit rate will drop to 3.25 percent from 3.5 percent effective tomorrow, the People’s Bank of China said on its website today. The benchmark one-year lending rate will drop to 6.31 percent from 6.56 percent. European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s growth outlook worsens. Spain sold 2.07 billion euros ($2.6 billion) of bonds, having set a maximum target of 2 billion euros, as its 10-year borrowing costs rose.
“The authorities are showing the determination to stimulate the economy and that certainly is a powerful message,” Esther Law, London-based director of emerging-markets strategy at Societe Generale SA, said by phone. “It’s a surprise in a good way and will force other central banks to think about whether this will be a good time to ease.”
The MSCI Emerging Markets Index (MXEF) has retreated 0.4 percent this year, compared with a 0.7 percent increase in the MSCI World Index. Shares in the emerging-markets gauge are trading at 9.9 times estimated earnings, cheaper than the 11.8 multiple for shares on the developed-nations index.
Federal Reserve Chairman Ben S. Bernanke today said the U.S. economy is at risk from Europe’s debt crisis and the prospect of fiscal tightening in the U.S. Fewer Americans applied for unemployment insurance payments last week as benefits fell by 12,000 to 377,000 in the week ended June 2, the Labor Department said today.
The Bank of England left its stimulus plan on hold today as threat from above-target inflation overrode policy makers’ concerns about the risk to the U.K. from Europe’s debt crisis. The Monetary Policy Committee, led by Governor Mervyn King, held its ceiling for bond purchases at 325 billion pounds ($503 billion) today, a move forecast by 37 out of 42 economists in a Bloomberg News survey.
The MSCI EM Information Technology (MXEF0IT) index added 2.6 percent to 232.77, the most in almost four months. Cielo rose for a third day in Sao Paulo, its longest winning streak in four weeks. NCSoft Corp. (036570) gained 6.8 percent, the most since May 23, to lead advances for the information technology sector.
Russia’s Micex Index added 1.8 percent as OAO Novatek, Russia’s second biggest natural gas producer, jumped 5.9 percent, the most since July 21. Novatek said today it plans to buy back as much as $600 million of shares and global depositary receipts within a year.
OAO RusHydro and OAO Inter RAO UES climbed after Russia’s Economy Minister Andrei Belousov said the state will sell its entire stake in the power utilities by 2016.
The Bovespa added 3.2 percent in Brazil, the most since May 21, on gains for OGX Petroleo e Gas Participacoes SA, the Brazilian oil producer controlled by billionaire Eike Batista. The shares rose 9.5 percent, the sharpest increase since Aug. 9.
The Czech Republic’s PX Index jumped 1.3 percent while Hungary’s BUX Index added 0.3 percent.
The ISE National 100 Index in Turkey gained 0.8 percent, while South Africa’s FTSE/JSE All Share Index rose 0.9 percent.
Templeton Asset Management Ltd. sees “bargains” in the biggest emerging markets after stock declines dragged the MSCI BRIC Index into a bear market, according to Co-Chief Executive Officer Dennis Lim.
“Emerging-market equities are cheap and as long-term investors, we have remained invested,” Lim, who helps manage $48 billion of emerging-market funds, said in a phone interview from Singapore on June 5. “We are finding a lot of bargains in China, India, Russia, Thailand, Brazil, and even in Africa.”
India yesterday outlined port, railways and road projects and a push to add power-generation capacity to revive growth in Asia’s third-largest economy.
The BSE India Sensitive Index (SENSEX), or Sensex, gained 1.2 percent in Mumbai, reaching its highest since May 7.
South Korea’s Kospi index jumped 2.6 percent, the most among Asian benchmark indexes, as the market re-opened after a holiday yesterday. The Hang Seng China Enterprises Index of mainland stocks added 0.4 percent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 5 basis points, or 0.05 percentage point, to 397, according to JPMorgan Chase & Co.’s EMBI Global Index.