Emerging Stocks Rise to 2-Week High on China Subsidies

Emerging-market stocks climbed to a two-week high as signs of a pick-up in technology demand and speculation China will take more steps to bolster economic growth overshadowed concern Europe’s debt crisis will spread.

The MSCI Emerging Markets Index (MXEF) rose 0.7 percent to 919.47 at the close in New York, the highest level this month. Cyrela Brazil Realty SA Empreendimentos e Participacoes surged 5.1 percent, while United Spirits Ltd. rose to lead the advance in the index. Russia’s Micex Index (INDEXCF) rallied 0.6 percent on gains for OAO Gazprom Neft. Brazil’s Bovespa advanced, led by Brookfield Incorporacoes SA, a real estate developer.

A gauge of technology stocks rose 0.7 percent after Taiwan Semiconductor Manufacturing Co. (2330), the world’s largest maker of custom chips, said demand for leading-edge chip technology is still strong. China ZhengTong Auto Services Holdings Ltd. (1728) jumped the most since October 2011 in Hong Kong after China said it will give trade-in subsidies of as much as 18,000 yuan ($2,826) for the replacement of some commercial vehicles.

“The market is being held up by perceived corporate catalysts and optimism of more subsidies at a time when Europe is still struggling with its debt crisis,” Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. (BDO), said by phone. “This rally won’t last until Europe takes more concrete steps.”

Europe Crisis

The MSCI developing-nation gauge has slumped 15 percent from this year’s peak on March 2 on concern Europe will struggle to contain its debt crisis and growth in the U.S. and China is slowing.

The index has risen 0.3 percent this year, compared with a 0.6 percent gain in the MSCI World Index. Shares in the emerging-markets index are trading at 10 times estimated earnings, cheaper than the MSCI World’s multiple of 11.8, according to data compiled by Bloomberg.

Brookfield gained 6.4 percent to the highest level this month in Sao Paulo, lifting Brazil’s Bovespa by 1.1 percent. as OAO Gazprom Neft added 3 percent to lead gains in the index.

The ISE National 100 Index (XU100) added 0.1 percent in Istanbul and the FTSE/JSE Africa All Share Index (JALSH) gained 0.5 percent.

Hungary’s BUX Index (BUX) jumped 0.4 percent, a second day of gains. OTP Bank Nyrt. (OTP), the nation’s largest lender, gained for a second day, rising 1.2 percent, after Prime Minister Viktor Orban said the government may scrap a special bank tax from next year.

The PX Index (PX) in the Czech Republic rose for the first time in four days, adding 0.4 percent as Erste Group Bank AG (EBS) climbed 0.2 percent.

Economic Data

Economic reports today showed South Korean unemployment fell to a four-month low and machinery orders rose more than economists estimated in Japan. Moody’s Investors Service said Australia’s economic strength is “very high.”

Machinery orders in Japan jumped, with bookings, an indicator of capital spending, rising 5.7 percent on the month in April, the Cabinet Office said in Tokyo. That was more than triple the pace estimated by economists.

The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong rose 1.5 percent. The 21st Century Business Herald reported China may relax rules on lending to local government financing vehicles and property developers.

Equity Benchmarks

Zhongsheng Group Holdings Ltd. (881), a retailer of automobiles, surged 6.5 percent. The subsidies will be given for the replacement of some trucks and buses, the Ministry of Finance said on its website today.

Equity benchmarks advanced at least 0.2 percent in Indonesia, South Korea and Taiwan. The BSE India Sensitive Index (SENSEX) gained 0.1 percent.

Taiwan Semiconductor rose 0.8 percent in Taipei. The company’s outlook remains unchanged, Chairman Morris Chang said in a shareholders meeting yesterday.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell one basis point, or 0.01 percentage point, to 392, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Christine Harvey in New York at charvey32@bloomberg.net; Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net; Tal Barak Harif at tbarak@bloomberg.net

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