Emerging Stocks Advance to Eight-Month High

Emerging-market stocks rose, lifting the benchmark index to an eight-month high, as the World Bank raised its East Asia growth outlook, business confidence in Germany improved and investors awaited a U.S. budget deal.

New World Resources Plc (NWR), the Czech Republic’s largest coal producer closed at a three-month high, helping the country’s benchmark PX Index post its longest rally since 2009. Russian steelmaker OAO Severstal rose for a fourth day. Poland’s Polskie Gornictwo Naftowe i Gazownictwo SA led a jump in emerging-market energy stocks, while Brazil’s Bovespa Index (IBOV) climbed to a three- month high as rising oil stoked gains in Petroleo Brasileiro SA. (PETR4)

The MSCI Emerging Markets Index (MXEF) added 0.7 percent to 1,053.17 in New York, the highest close since April 3. Developing nations in East Asia will probably grow 7.5 percent this year, compared with a previous forecast of 7.2 percent, contributing about 40 percent of global growth, the World Bank said in a report today. U.S. House Speaker John Boehner’s “Plan B” budget plan would put “too big a burden on the middle class” and President Barack Obama would veto it, White House Communications Director Dan Pfeiffer said.

“Asia is the most attractive region in the world, and China is clearly the dominant influence in that region,” Steven Bell, portfolio manager of hedge fund GLC Ltd.’s Global Macro Fund, which has $600 million assets, said by phone from London. “World final demand is picking up.”

Brazil, Mexico

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.

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, was little changed at $43.51. The ETF advanced 15 percent this year. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, added 1.2 percent to 20.28.

Brazil’s Bovespa rose 0.9 percent, gaining for a second day and closing at the highest level since Sept. 24. Petrobras, as Petroleo Brasileiro is known, added 3.6 percent, the highest close since Nov. 9. The Mexican IPC Index (MEXBOL) lost 0.4 percent, dropping for the first time in four days.

Eastern Europe

A gauge of financial stocks in the MSCI Emerging Markets Index added 0.9 percent to the highest since August 2011. The broader index has risen 15 percent this year, beating a 14 percent gain by the MSCI World Index of developed countries. The developing-nations measure trades at 12.1 times estimated earnings, compared with the MSCI World’s multiple of 13.8, data compiled by Bloomberg show.

The FTSE/JSE Africa All Share Index climbed to a record for a second day, while the South African rand pared gains, weakening for the first time in four days.

Benchmark indexes in Poland and the Czech Republic climbed on expectations that the countries will benefit from improving confidence in Germany, Europe’s biggest economy. The German Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 102.4 in December from 101.4 in November.

Novorossiysk Commercial

Stocks in Poland added 1 percent to the highest level since July 2011. The Czech Republic’s PX Index added 1 percent, rising for a seventh day, its longest winning streak since March 2009. New World Resources jumped 5.5 percent for a sixth day of gains, its longest winning streak in two years.

Severstal gained 4.2 percent, rising for a fourth day in Moscow, the longest streak of increases since Sept. 12. OAO Novorossiysk Commercial Sea Port declined 3.6 percent, the biggest drop on the Micex and the stock’s first loss in seven days. Novorossiysk reported “disappointing numbers” in November, Andrey Rozhkov, an analyst at IFC Metropol, said by phone from Moscow. Russia’s Micex Index (INDEXCF) slipped 0.2 percent.

Developing East Asia is set to expand 7.9 percent in 2013, according to the World Bank. The region is expected to account for about 40 percent of global growth in 2012, it said.

Low Rates

“Asia as a region is in expansionary mode without the problems plaguing the U.S. or Europe,” Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc., said by phone. “Low interest rates and infrastructure spending support the region’s expansionary growth outlook.”

The Bank of New York Mellon South Korea ADR index was little changed at 187.70 in New York, while the iShares MSCI South Korea Index Fund, an exchange-traded fund incorporated in the U.S., added 0.1 percent to $62.38. Park Geun Hye was forecast to win South Korea’s presidential election, becoming the first woman to lead Asia’s fourth-biggest economy, more than 30 years after her father’s reign as dictator ended with his assassination. South Korea’s market is closed for elections.

Trains to Iraq

Goldman said in a note to clients today that comments by India’s central bank yesterday signal a 50 basis point cut in the nation’s benchmark rate starting January.

The BSE India Sensitive Index, or Sensex, added 0.6 percent to its highest level in almost two weeks. The Philippine Stock Exchange Index (PCOMP) rose 2.1 percent after the government forecast “robust” first-half economic growth. Thailand’s SET Index climbed 1.1 percent to the highest since February 1996.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 0.8 percent, the highest close since March. Dongfang Electric Corp. (600875) climbed 5.3 percent to the highest price since Jun. 27 in Hong Kong after winning a $115 million contract to deliver 10 diesel multiple-unit passenger trains to Iraq, according to a spokesman for state-run Iraqi Railway Co.

SapuraKencana Petroleum Bhd. climbed 3.7 percent in Kuala Lumpur, the highest level on record.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed by two basis points, or 0.02 percentage point, to 262 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Ian Sayson in Manila at isayson@bloomberg.net; Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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