Developing nation stocks rose, extending the best monthly gain since February, as China injected a record amount of funds into its financial system and on speculation Spain may request a bailout.
The MSCI Emerging Markets Index increased 0.4 percent to 1,002.66, bringing its advance this month to 5.8 percent. The Shanghai Composite Index (SHCOMP) jumped 1.5 percent as the yuan hit the strongest level since 1993 and SAIC (600104) Motor Corp., China’s largest carmaker, surged the most in four months. India’s benchmark gauge increased to a 14-month high and Russia’s Micex index rallied for a second day.
China’s money-market rate completed the biggest weekly drop in 11 months after the central bank’s actions to ease a cash crunch before next week’s holiday. The Shanghai Composite has rallied from a 3 1/2-year low on Sept. 26 amid speculation policy makers will take steps to boost growth. Spanish 10-year government bonds erased a decline on speculation the nation may request a bailout, enabling the European Central Bank to buy its debt.
“The main driver remains the very supportive global liquidity conditions that has helped risk assets tremendously,” Aryam Vazquez, an economist for global emerging markets at Wells Fargo & Co., said by phone from New York. “China has been very adamant about their ability to prime the fiscal pump to maintain their growth rates. You are still looking at a more positive structural outlook for emerging markets.”
EM ETF Slips
The iShares MSCI Emerging Markets Index (MXEF) exchange-traded fund, the ETF (EEM) tracking developing-nation shares, dropped 0.6 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 4.1 percent.
Brazil’s Bovespa stock index slid 1.8 percent as Banco do Brasil SA, Latin America’s largest lender by assets, declined 3.9 percent. Goldman Sachs Group Inc. cut its rating on the lender to the equivalent of hold and Valor Economico said the state-controlled lender will lower fees on some services.
The BSE India Sensitive Index (VXEEM) increased 1 percent and the rupee strengthened 0.3 percent against the dollar as the government maintained its target for debt sales. Offshore investors bought shares worth $3.5 billion this month, the highest inflows since February.
A report after local markets closed today showed India’s current-account deficit narrowed last quarter from a record. The shortfall was $16.4 billion in the three months ended June 30, compared with a $21.7 billion gap from January through March, the Reserve Bank of India said. The median of 16 estimates in a Bloomberg News survey was a $14.2 billion deficit.
Hungary’s BUX Index dropped 0.5 percent after the nation’s current-account surplus was smaller than economists estimated in the second quarter.
The extra yield investors demand to own emerging-market dollar bonds over U.S. Treasuries rose three basis points, or 0.03 percentage point, to 307, according to JPMorgan’s EMBI Global Index.
Shanghai-based SAIC jumped 4.7 percent after Daiwa Securities Group Inc. said falling industry inventories point to improving conditions.
The People’s Bank of China injected a net 365 billion yuan ($58 billion) via reverse-repurchase operations and bill redemptions this week, the most since Bloomberg started compiling the data in 2008. That compares with 101 billion yuan added last week. China’s financial markets will be shut next week for the National Day and mid-autumn holidays.
The yuan had its biggest gain in six months after the PBOC strengthened its reference rate today by the most since Aug. 22.
Korea Aerospace Industries Ltd. (047810), a maker of supersonic trainer jets, jumped 15 percent in Seoul after Hyundai Heavy Industries Co. offered to buy a stake, rivaling a bid from Korean Air Lines Co. The nation’s Kospi Index rose 0.4 percent.
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