Emerging Stocks Post Biggest Weekly Gain Since February

Emerging-market stocks posted the biggest five-day advance in four months on speculation central banks will take steps to shelter economies from Europe’s debt crisis.

The MSCI Emerging Markets Index (MXEF) rose 1.3 percent to 925.22 by the close in New York, extending its five-day gain to 2.2 percent, the most since the week of Feb. 3. Energy companies led the advance as OGX Petroleo e Gas Participacoes SA rallied 5.7 percent in Sao Paulo. OAO Mechel surged 9.4 percent to lift Russia’s Micex Index to the highest level in a month. Brazil’s Bovespa posted the biggest weekly advance since February, led by gains for Gafisa SA (GFSA3), the Brazilian homebuilder.

Greek elections on June 17 may determine if the country upholds austerity conditions attached to international aid and could lead to the first ouster from the euro area. Industrial production in the U.S. unexpectedly fell in May for the second time in three months and the Thompson Reuters/University of Michigan preliminary index of consumer sentiment for June fell more than expected. Manufacturing in the New York region expanded in June at the slowest pace in seven months.

“The markets are hopeful that Greek elections will bring some sort of fiscal discipline and that policy makers will react more to weakness in the euro zone,” Bernie Horn, president of Polaris Capital Management LLC, said by phone from Boston today. “Despite the fact the U.S. data hasn’t been great, the U.S. is showing it’s getting its competitiveness back and that’s ultimately good for the U.S. and the world economy.”

The MSCI Emerging Markets gauge has added 1 percent this year and trades at a multiple of 10 times estimated earnings, compared with 11.9 for a developed-nation index, which has gained 2.2 percent this year.

Energy Gains

The IShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF tracking developing-nation shares, rose 1.8 percent to $38.99, the highest in a month.

The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, fell 8.4 percent to 31.59.

Energy companies added 2.6 percent to 640.60, the most since Jan. 3. PT Bumi Resources (BUMI), Asia’s largest exporter of power-station coal, jumped 4.9 percent after falling to the lowest level since 2009 yesterday.

Commodity Producers

The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 0.1 percent to 582.62 in New York. Copper rallied for a second day on bets economic stimulus from central banks will boost metals demand. Crude oil also rose for a second day to $84.03 a barrel on the New York Mercantile Exchange.

Russia’s benchmark index rose 3.2 percent for a fourth consecutive week of gains, the longest winning streak in four months. Mechel (MTLR), Russia’s biggest producer of coal for steelmakers, rose the most since Nov. 30.

The ruble appreciated 0.2 percent against the dollar. Investors should buy the currency against the dollar to take advantage of what is likely to be a temporary bounce in risk assets following the Greek elections, Bhanu Baweja, emerging- market strategist at UBS AG in London, wrote in an e-mailed note.

Brazil’s Bovespa added 3.1 percent in Sao Paulo this week. Gol Linhas Aereas Inteligentes SA (GOLL4), Brazil’s second-biggest airline, jumped 9.3 percent today, extending its weekly gain to 22 percent. Gafisa SA, a Brazilian homebuilder, rose 22 percent this week, the sharpest five-day gain since April 2009. OGX Petroleo, a Brazilian oil company, added 5.7 percent today.

Turkish Streak

BHP Billiton Ltd. (BIL), the world’s biggest commodity producer, gained 1.9 percent in South Africa. New World Resources Plc (NWR), the biggest Czech producer of coking coal, jumped 6.1 percent.

The FTSE/JSE Africa All Share Index (JALSH) gained 0.4 percent in Johannesburg and the WIG20 Index (WIG20) advanced 1.2 percent in Warsaw.

The ISE National 100 Index (XU100) advanced 0.2 percent in Istanbul, gaining for an 11th day, the longest winning streak since 1993. The BUX Index (BUX) jumped 2.4 percent in Hungary to the highest since May 11.

Emerging-market funds lured inflows of $920 million during the week ended June 13 after China cut interest rates and Spain asked euro-region governments over the weekend for as much as 100 billion euros ($126 billion) to help shore up its banking system, according to a Citigroup Inc. report today, which cited EPFR Global.

The Sensitive Index, or Sensex (SENSEX), gained 1.6 percent in Mumbai to the highest since May 3. Vietnam’s VN Index surged 1.8 percent after Deputy Prime Minister Nguyen Xuan Phuc said the government will accelerate spending and boost bank lending to bolster the economy. South Korea’s Kospi Index (KOSPI) retreated 0.7 percent.

Power Failure

Samsung Electronics Co. (005930), which makes up 17 percent of the Kospi, dropped 3.5 percent. Samsung Display Co. said four lines were halted for 11 minutes after a power failure yesterday. Lines have resumed operation and potential damage from the stoppage is being assessed, it said.

Sri Lanka’s benchmark Colombo All-Share Index rose 1.4 percent. Foreign investors are pouring record amounts of money into Sri Lankan stocks as valuations drop to the lowest levels since 2009.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell five basis points, or 0.05 percentage point, to 386, 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; Jason Webb in London at jwebb25@bloomberg.net

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

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