Emerging Stocks Jump as ECB Bond Buying Plan Boosts Risk
Emerging-market stocks climbed from a one-week low as the European Central Bank’s commitment to buy government bonds buoyed the outlook for the global economy and boosted appetite for riskier assets.
The MSCI Emerging Markets Index (MXEF) rose 0.3 percent to 1,005.52, rising for the fifth time in six days. The BSE India Sensitive Index (VXEEM) surpassed 19,000 for the first time since July 2011 as India considers more measures to attract foreign investment. Equity indexes in Hungary, Colombia and Mexico also gained. The Micex Index in Moscow slipped 1.1 percent as power company stocks retreated while the Bovespa stock gauge lost 0.3 percent in Brazil.
The ECB is ready to purchase sovereign debt once necessary conditions are in place, President Mario Draghi said today, as the pan-European regulator seeks to ease borrowing costs for debt-saddled nations such as Spain. A less-than-estimated increase in U.S. jobless claims also supported developing market equities, as the 21 countries in the MSCI gauge send about 13 percent of exports there, World Trade Organization data show.
“To get a reassuring message from the ECB is viewed as a solid backdrop for risk,” Benoit Anne, the head of emerging- market strategy at Societe Generale SA, said by phone from London. “If we have growth fundamentals improving in America it’s a major signal that the global economy may bottom out soon.”
EM ETF Advances
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, rose 1 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, decreased 1.8 percent.
The MSCI Emerging Markets Index has climbed 9.7 percent this year, trailing a 12 percent increase in the MSCI World Index (MXWO) of developed countries. The emerging-markets gauge trades at 11.3 times estimated earnings, compared with the MSCI World’s multiple of 13.3, according to data compiled by Bloomberg.
The Bovespa dropped for a third day as Gafisa SA (GFSA3), Brazil’s sixth-biggest homebuilder, dropped 7.6 percent to the lowest since Aug. 17.
Applications for jobless benefits increased 4,000 to 367,000 in the week ended Sept. 29 in the U.S., Labor Department figures showed today. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. The prior week’s reading was the lowest in two months.
Russia’s Micex Index dropped for a third straight day. The benchmark index in Poland also declined.
OAO MRSK Holding lost 3.4 percent to the lowest level in three weeks after Russian Deputy Prime Minister Arkady Dvorkovich said a decision on merging the nation’s largest electricity distribution company with Federal Grid Co. would be delayed.
Polskie Jadlo, a Polish restaurant chain, surged 13 percent, the most since May 10, after saying a foreign investor seeks to buy a stake.
Lee & Man Paper Manufacturing Ltd. (2314) surged 7.9 percent, the most in six months in Hong Kong, after JPMorgan Chase & Co. upgraded the stock’s rating. Woongjin Coway Co. (021240) jumped 14 percent in Seoul after Korea Economic Daily said that creditor banks of its parent want MBK Partners Ltd. to buy the company.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies advanced 0.2 percent. Markets in China remain closed today for holidays.
Indian ministers approved proposals allowing overseas companies to hold as much as 49 percent in insurance firms, and for the first time permit foreign investment in pension funds. The bills will need the consent of lawmakers in parliament.
The government last month threw open retail and aviation sectors to overseas investment, and cut fuel subsidies, ending a two-year policy paralysis.
Compal Electronics Inc. (2324) and Quanta Computer (2382) Inc. led Taiwan computer makers lower in Taipei after customer Hewlett-Packard Co. (HPQ) forecast 2013 profit that missed analysts’ estimates. Hewlett-Packard Chief Executive Officer Meg Whitman said yesterday a turnaround at the computer maker won’t happen soon.
Compal fell 3.6 percent, Quanta Computer declined 4 percent and Wistron Corp. (3231) dropped 4.6 percent.
The extra yield investors demand to own emerging-market dollar bonds over U.S. Treasuries slid five basis points, or 0.05 percentage point, to 295, according to JPMorgan’s EMBI Global Index.
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