Emerging Stocks Rise to One-Month High on China Outlook
Emerging-market stocks rose, sending the benchmark index to its highest level in a month, on speculation China’s economy is stabilizing and as Moody’s Investors Service retained Spain’s investment-grade rating.
Cosco Pacific Ltd. (1199), which gets about 35 percent of its revenue from Europe, climbed to the highest since March in Hong Kong. Chinese banks including Industrial & Commercial Bank of China Ltd. rose after upgrades by Credit Suisse Group AG. Brazil’s Bovespa index advanced for a fourth day as OGX Petroleo & Gas Participacoes SA (OGXP3) rose. OAO Gazprom, Russia’s largest natural-gas producer, gained and Poland’s Telekomunikacja Polska SA (TPS) tumbled 15 percent after cutting its dividend and earnings forecast.
The MSCI Emerging Markets Index rose 0.7 percent to 1,010.85 at the close of trading in New York, the highest level since Sept. 17. Credit Suisse said the Chinese economy is probably bottoming and Premier Wen Jiabao said the country’s economic situation last quarter was “relatively good.” The European Central Bank’s willingness to buy Spain’s debt lowered the risk of losing access to credit markets, Moody’s said yesterday. A U.S. report today showed new-home construction rose to a four-year high in September.
“Emerging markets are getting buoyed by a confluence of favorable factors that are neutralizing the outlook of a global slowdown,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “A bottoming China and rising U.S. industrial output will boost global demand while an investment grade raises the chances of a bailout for Spain.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, rose 0.8 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, fell 2.4 percent.
The Hang Seng China Enterprise Index (HSCEI) advanced 1.2 percent to the highest close since May 8. The Kospi index climbed 0.7 percent after Macquarie Group Ltd. raised South Korea to an equivalent of buy. Russia’s Micex Index rose 1.3 percent and the BSE India Sensitive Index added 0.2 percent after Macquarie upgraded India to neutral.
The Bovespa rose 0.6 percent on its fourth day of gains, the longest winning streak in a month. Credit card processor Cielo SA (CIEL3) gained 2.9 percent while OGX, controlled by billionaire Eike Batista, rose 1.8 percent. OSX Brasil SA (OSXB3), also controlled by Batista, surged 8 percent after Batista announced he will buy $500 million of new voting stock by March and may buy an additional $500 million within another year, according to a regulatory filing today.
Turkey’s ISE National 100 Index climbed 0.6 percent, advancing for a 10th day, its longest winning streak since June. Thailand’s SET Index added 1.1 percent after the country’s central bank unexpectedly cut its benchmark interest rate for the first time since January.
The Bloomberg-JPMorgan Asia Dollar Index rose for a fifth day to its highest close in eight months. The yuan advanced to its highest since 1993. The ruble climbed for a second day.
Measures of industrial and energy stocks led gains among the MSCI Emerging Markets Index (MXEF)’s 10 industry groups. The broader gauge has risen 10 percent this year, trailing a 13 percent increase in the MSCI World Index of developed countries. The emerging-markets gauge trades at 11.6 times estimated earnings, compared with the MSCI World’s multiple of 13.4, data compiled by Bloomberg show.
The 21 nations in MSCI’s developing-nations gauge send about 30 percent of their exports to the European Union on average and 13 percent to the U.S., according to data compiled by the World Trade Organization.
China’s worst is probably over as infrastructure investment, housing starts, retail sales, manufacturing indexes and construction machinery sales all indicate the economy is stabilizing, Vincent Chan and Peggy Chan, analysts at Credit Suisse, wrote in a report dated yesterday. Credit Suisse raised its recommendation on the banking, material and transportation industries to overweight.
China is scheduled to release third-quarter gross domestic product data tomorrow. The economy probably expanded 7.4 percent, the slowest pace in more than three years, according to the median estimate of 43 analysts surveyed by Bloomberg.
“China’s economic growth has started to stabilize,” the official Xinhua News Agency said today, citing meetings Premier Wen held Oct. 12-15 with industry leaders, company executives and some local government officials.
Cosco Pacific, which operates container terminals, rose 5.8 percent. Industrial & Commercial Bank gained 1.8 percent, ending a two-day retreat.
“Growth is continuing and doing very well” in China, Mark Mobius, who oversees about $48 billion as the executive chairman of Templeton Emerging Markets, said in an interview on Bloomberg Television’s “On the Move Asia” with Rishaad Salamat. Mobius said he’s buying Chinese consumer shares, including retailers.
Hungary’s BUX index sank 0.7 percent after Economy Minister Gyorgy Matolcsy told reporters today the government won’t meet its pledge to banks to halve the tax on lenders next year. Hungary will increase a separate tax on financial transactions and introduce a levy on utility infrastructure to shrink the budget deficit, he said. OTP Bank Nyrt., Hungary’s largest lender, fell 3.7 percent.
Telekomunikacja Polska, Poland’s biggest phone company, dropped the most on record, dragging the benchmark WIG20 index in Warsaw to its first loss in three days. TPSA, as the France Telecom SA unit is known, expects sales to drop 4 percent to 5 percent this year, compared with an earlier forecast for a 3 percent decline, according to a regulatory statement late yesterday. The company will recommend paying a dividend of 1 zloty per share from its 2012 profit, down 33 percent from an earlier proposal.
JSW Steel Ltd. (JSTL), India’s third-biggest producer, fell 2.8 percent in Mumbai after the Central Bureau of Investigation filed charges related to illegal mining of iron ore against the company and two of its executives. Chief Executive Officer Vinod Nowal and Vikas Sharma, a senior vice president, were named in the charges, two CBI officials said yesterday, requesting anonymity because they aren’t authorized to speak on the subject.
“There is absolutely no illegality or immorality in what we have done,” Nowal said today in a phone interview. “We haven’t received any favors from anybody nor have we extended any favors to anyone. We’ll present our case strongly and expect the court to do justice.”
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 10 basis points, or 0.1 percentage point, to 269, according to JPMorgan Chase & Co.’s EMBI Global Index.
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