Emerging-market stocks rose the most since June, currencies strengthened and borrowing costs fell to a 17-month low as the Federal Reserve’s new round of stimulus measures boosted confidence in the global economy.
The MSCI Emerging Markets Index (MXEF) advanced 3.3 percent to 1,014.07, climbing for a seventh day in the longest winning streak since October. Brazil’s Bovespa stock index gained, with oil company Petroleo Brasileiro SA buoyed by rising crude prices. The Russian ruble and India’s rupee surged more than 2 percent. The extra yield on emerging-market debt over U.S. Treasuries fell to 2.81 percentage points, the lowest since April 2011, according to JPMorgan Chase & Co.
The Fed announced a third round of asset purchases yesterday, pledging for the first time that it will buy bonds until the economy recovers and keep the benchmark interest rate near zero until at least the middle of 2015. The stimulus may spark a rally in emerging-market assets similar to the first quarter, when the MSCI index (VXEEM) jumped more than 13 percent and currencies strengthened, Societe Generale SA said.
“The policy announcements are great and we now know where the Fed stands and it just reflects an improved degree of certainty,” Seth Freeman, San Francisco-based chief executive officer at EM Capital Management LLC, said by phone. “There’s a realization that investors have been under-invested in emerging markets through most of the year, and they are seeing some of these markets slowly recover particularly after Bernanke’s talk.”
EM ETF Gains
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, increased 1.2 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 1.4 percent.
The Bovespa increased 0.2 percent to the highest since May 2. Petrobras climbed 1.7 percent.
Zhaojin Mining Industry Co. (1818) jumped 16 percent in Hong Kong, the most in the MSCI index, as a weaker dollar boosted commodity prices. Daewoo Securities Co. (006800), a Seoul-based broker, surged 15 percent, the most since October 2008, on speculation investor demand for equities and fixed-income securities will increase.
The Fed’s open-ended asset purchases follow the European Central Bank’s Sept. 6 announcement of an unlimited bond-buying program to combat the region’s debt crisis and China’s approval of proposals to build rail, roads and urban infrastructure.
“We will have to see further down the road how effective these measures are, but for now it’s a good signal that authorities in the U.S., Europe and China are taking steps to avert a slowdown,” said Allan Yu, who helps manage about $9.5 billion at Manila-based Metropolitan Bank & Trust (MBT) Co.
The Hang Seng China Enterprises Index (HSCEI) gained 3.7 percent. The Micex climbed 4.3 percent.
Global equity funds attracted $12.1 billion in the week ended Sept. 12, the largest inflow this year, Citigroup Inc. analysts led by Markus Rosgen wrote in a report today, citing data compiled by EPFR Global. About $390 million was invested in emerging-stock funds amid speculation the Fed would introduce its third round of asset purchases, according to the report.
The ruble strengthened for a ninth day, advancing 2.5 percent versus the U.S. dollar in the longest stretch of gains since January. Russia’s central bank unexpectedly raised interest rates yesterday after inflation exceeded its target.
India’s rupee appreciated 2 percent and the Malaysian ringgit rose 1.3 percent. South Korea’s won added 1 percent.
The BSE India Sensitive Index climbed 2.5 percent to the highest level since July 2011 after the government raised diesel prices for the first time in more than a year, bolstering the outlook for state finances. Reliance Industries Ltd., owner of the world’s largest refining complex, advanced 5.3 percent.
The government said after the close of local markets that it will open its retail and aviation industries to foreign investment.
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