Emerging-market stocks rose for a second straight week, capping a 1.4 percent jump in November, amid growing confidence the global economy is strengthening. Equity gauges in Russia, India and Taiwan posted gains.
Centrais Eletricas Brasileiras SA (ELET6), Brazil’s largest power company, surged the most in more than 13 years after the state increased compensation to utilities that agree to cut power rates. OAO Sberbank, Russia’s largest lender, rose as MSCI Inc. (MSCI) prepared to increase the stock’s weight in its country index. Compal Electronics Inc. (2324) rallied in Taipei, leading a gauge of emerging-nation technology stocks to the highest since May 2011.
The MSCI Emerging Markets Index climbed 0.3 percent to 1,007.02 in New York, its highest close since Nov. 7, for a weekly gain of 1.1 percent. Stocks have been advancing amid signs of economic recovery in America and Asia and on expectations that political leaders in the U.S. will reach a budget compromise while Europe will take steps to keep debt crisis from escalating.
“There is the continuation of the risk-on mode we have seen in global markets,” Benoit Anne, head of emerging-market strategy at Societe Generale SA in London, said by e-mail. “Hope about the U.S. budget and bullish environment for next year” are driving the emerging-market gains, he said.
German lawmakers approved today Greece’s latest rescue package designed to ease terms of aid, while U.S. President Barack Obama headed out to sell his budget plan to the American public.
Eletrobras jumped 24 percent, the biggest advance since January 1999. Brazil’s government is offering an additional 9.87 billion reais ($4.7 billion) to utilities that accept President Dilma Rousseff’s plan to renew electricity license with lower rates, on top of 20.04 billion reais announced Nov. 1, a government official said yesterday.
Sberbank rose 4 percent, helping to lift the Micex Index 1.3 percent higher, as MSCI is set to increase the stock’s weighting in its Russia gauge by 2.5 percentage points to 14.4 percent. The rebalancing, which comes into effect on Dec. 3, may trigger inflows of about $213 million for Sberbank from passive funds, VTB Capital said in a note.
Indian equities climbed to a 19-month high and the rupee strengthened against the dollar as the nation’s quarterly gross domestic product growth matched estimates. Brazil’s Bovespa index slid 0.7 percent after the country’s economy expanded at half the estimated pace in the third quarter.
The Hang Seng China Enterprises Index (HSCEI) rose 1.3 percent and the Shanghai Composite Index rallied for the first time in five days, paring a monthly loss. The measure traded at an average 10.9 times reported earnings, the lowest level since at least 1997.
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, lost 0.1 percent for a gain of 1.5 percent in November. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, climbed 3 percent.
Standard & Poor’s said yesterday China has “exceptional” growth prospects, while confidence in China’s economy is at the highest in more than a year, according to a Bloomberg investor poll. Japan approved additional stimulus and the nation’s factory production unexpectedly gained.
“The rally will get a leg up when China starts boosting investments,” Gopal Agrawal, chief investment officer at Mirae Asset Global Investments (India) Pvt., said by phone today from Mumbai. “Chinese activity, which has been picking up since September, shows the economy has stabilized. Indian GDP numbers are satisfactory, and it reveals that the growth cycle has bottomed out.”
Taiwan’s Taiex index advanced 1 percent while Thailand’s SET gauge rose 1.1 percent to the highest since May 1996. The Jakarta Composite Index fell 1 percent, leaving the gauge down 1.7 percent this week, the worst since August. Mobile telecommunications company PT XL Axiata (EXCL) sank the most since January 2010, the worst performing member of the emerging markets gauge. Shares plunged 13 percent as volumes were 4.7 times the three-month average, according to data compiled by Bloomberg.
Trading volumes for the Taiex Index were 106 percent above the 30-day average, data compiled by Bloomberg show. The MSCI Emerging Markets Index (MXEF)’s 50-day volatility was near the lowest level since 2004. India’s rupee strengthened 1 percent, leading gains in emerging-market currencies.
Gauges of utility and financial stocks led gains among the MSCI Emerging Markets Index’s 10 industry groups. The broader measure has advanced 9.9 percent this year, trailing an 11 percent gain by the MSCI World Index of developed countries. The developing-nations index trades at 11.6 times estimated profit, compared with the MSCI World’s 13.5, data compiled by Bloomberg show.
The BSE India Sensitive Index, or Sensex (SENSEX), advanced 0.9 percent, the highest level since April 2011, extending this month’s gain to 4.5 percent. India’s gross domestic product rose 5.3 percent in the three months to Sept. 30 from a year earlier, compared with 5.5 percent in the previous quarter, the Central Statistical Office said today. That matched the median of 42 estimates in a Bloomberg survey.
Equity funds drew more money than bonds for the first time in 10 weeks as economic data improved and amid optimism U.S. lawmakers will reach a budget compromise, according to Citigroup Inc. (C) Stock funds attracted $14.9 billion in the week ended Nov. 28, the second-largest weekly inflows this year, more than the $5.1 billion lured by bond funds, Markus Rosgen and Yue Hin Pong wrote in a report today, citing data compiled by EPFR Global.
Compal, which owns 25 percent of Allied Circuit Co. Ltd. (8155), rose 6.8 percent, its steepest gain this year. Allied Circuit held an investor conference in Taipei yesterday before an expected initial offering of shares next month.
Guangzhou R&F Properties Co. (2777), a developer in the southern Chinese city, increased 7.5 percent in Hong Kong to its highest since April 2010. Chinese developers gained yesterday as Moody’s Investors Service upgraded the sector to stable from negative. The Shanghai Stock Exchange Property Index (SHPROP) rose the most in a month today, extending its 2012 advance to 11 percent, the only gainer this year among the five industry groups in the nation’s benchmark index.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 2 basis points, or 0.02 percentage point, to 285, according to JPMorgan Chase & Co.’s EMBI Global Index.
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