Emerging-market stocks advanced, pushing the benchmark index to an eight-month high, as prospects of a recovery in China and a resolution to the U.S. budget impasse bolstered raw materials companies.
Gold producer Zhaojin Mining Industry Co. (1818) rallied the most in six weeks in Hong Kong, while Industrias CH SAB (ICHB), Mexico’s largest steelmaker, helped lead a gauge of emerging-market materials stocks to the highest level since May. OAO Rostelecom’s preferred shares rallied to a six-week high on a report the Russian phone operator may need to buy stock to maintain state control. Usinas Siderurgicas de Minas Gerais SA led the Bovespa Index’s advance to the highest in 12 weeks.
The MSCI Emerging Markets Index (MXEF) climbed 0.6 percent to 1,046.24 in New York, the highest close since April 3. Goldman Sachs Group Inc. raised its quarterly growth forecast for China, where the economy has slowed over the past seven quarters. U.S. President Barack Obama and House Speaker John Boehner moved closer to a budget deal as Obama lowered his tax revenue demand by $200 billion and offered to start tax rate increases at incomes of $400,000, not $250,000.
“China’s coming back, and that means better times not only for China but throughout the region,” Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, where he oversees more than $20 billion, said by phone. “In the short run, everyone is waiting to see what the fiscal cliff resolution is.”
The 21 countries in the emerging-markets index send about 17 percent of their exports to the U.S., according to data compiled by the World Trade Organization. China is the world’s largest exporter and counts the U.S. and Europe as its biggest trading partners.
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, added 0.7 percent to $43.53, extending a yearly advance of 15 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, dropped 3 percent to 20.04. Fifty-day volatility on the MSCI emerging stock gauge was 8.72, after falling to 8.71 on Dec. 14, the lowest since 2004.
Boehner said he will push a budget “plan B” measure that would include tax increases on income of more than $1 million, while continuing to negotiate with Obama. The two met at the White House yesterday with days left to avert more than $600 billion in automatic spending cuts and tax increases that go into effect next year if a budget deal isn’t reached.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed by seven basis points, or 0.07 percentage point, to 263 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Bovespa closed at the highest level since Sept. 26 as preferred shares of Usiminas, the second-largest Brazilian steelmaker by output, jumped 7.5 percent for the steepest advance in the MSCI emerging measure. The Mexican IPC Index (MEXBOL) added 1.1 percent, climbing for a third day. Industrias CH jumped 5.2 percent in Mexico City.
Russia’s Micex Index (INDEXCF) rose 0.8 percent as the ruble strengthened against the dollar for the first time in four days.
South Africa’s FTSE/JSE Africa All Shares Index rose to a record after being closed for a public holiday yesterday. ArcelorMittal South Africa Ltd., Africa’s largest steelmaker, led gains in Johannesburg as it jumped 5.9 percent.
Hungary’s BUX Index (BUX) climbed 1 percent, the most in two weeks. The nation’s central bank will cut the European Union’s highest benchmark rate for a fifth month, according to all 19 economists in a Bloomberg survey.
The Turkish lira strengthened 0.3 percent versus the dollar as the central bank cut its benchmark repo rate for the first time in 16 months. Turkish Airlines (THYAO) added 0.6 percent for a record close after Yapi Kredi Yatirim raised its price estimate for the stock on “strong” air traffic figures, according to an e-mailed note today.
Uranium One Inc. (UUU), which mines the raw material used in reactor fuel, surged 13 percent in Johannesburg, the most since August 2011, after the pro-nuclear Liberal Democratic Party won a landslide election victory in Japan in a Dec. 16 poll.
Rostelecom’s preferred shares gained 1.4 percent to the highest price since Nov. 2. The state-owned company’s units may need to buy as much as 6.7 billion rubles of preferred shares and convert them into ordinary stock to keep the government’s stake above 50 percent after Rostelecom’s merger with Svyazinvest, the Kommersant newspaper reported, citing proposals by brokerage Renaissance Capital.
The BSE India Sensitive Index advanced 0.6 percent, the most in two weeks, as the central bank hinted it may undertake monetary policy easing next month even after it kept interest rates unchanged for a fifth straight meeting.
The developing-nations gauge has risen 14 percent this year, matching a 14 percent increase in the MSCI World Index (MXWO) of developed-country stocks. The emerging-markets gauge trades at 12.1 times estimated profit, compared with the MSCI World’s 13.9 multiple, according to data compiled by Bloomberg.
Most Chinese stocks fell as the Shanghai Composite Index (SHCOMP) advanced 0.1 percent. The yuan strengthened for a second day after the People’s Bank of China set a stronger reference rate and amid speculation capital inflows will increase after the government eased investment limits.
Goldman Sachs raised China’s fourth-quarter economic growth forecast to 7.8 percent from 7.6 percent, reflecting “stronger- than-expected” production data in October and November, according to a report.
Zhaojin Mining added 3.1 percent in Hong Kong, while Korea Zinc Co., which produces gold and silver, gained 2.7 percent. Cia Siderurgica Nacional SA, Brazil’s third-largest steelmaker by output, gained 5.1 percent, rising for a third day.
TPK Holding Co. (3673), a supplier of touch panels for Apple devices, jumped 5.6 percent in Taipei. TPK said in a statement it will buy a unit from Dynamic Electronics Co. for $26 million to expand capacity.
Petronas Dagangan Bhd. (PETD) jumped 6.2 percent in Kuala Lumpur, snapping a five-day slump and making it the second-best performer on the MSCI Emerging Markets gauge after Usiminas. Malaysia’s Employees Provident Fund bought 366,000 shares in the company this month, stock exchange filings showed.
Shui On Land Ltd. (272), the Shanghai-based developer, retreated 5.6 percent in Hong Kong, after Socam Development Ltd. cut its holdings through a private placement. The company was the worst performer on the emerging markets benchmark.