Emerging-market stocks rose, spurred by the biggest rally in Shanghai-listed shares in four weeks, after China’s securities regulator said foreign investor quotas can increase 10-fold and financial shares climbed.
Haitong Securities Co. and China Life Insurance Co. (2628) advanced at least 2.9 percent in Hong Kong as the Shanghai Composite Index (SHCOMP) jumped to a seven-month high. Indian developer DLF Ltd. drove gains among financial companies after JPMorgan Chase & Co. raised the shares to the equivalent of buy. PDG Realty SA Empreendimentos & Participacoes and Banco do Brasil SA drove Brazil’s Bovespa index to a one-week high.
The MSCI Emerging Markets Index (MXEF) gained 0.7 percent to 1,080.71 in New York, the steepest advance since Jan. 2. China can boost the size of two programs allowing foreigners to buy yuan-denominated A shares and bonds, China Securities Regulatory Commission Chairman Guo Shuqing said. Burnishing the global outlook, German Finance Minister Wolfgang Schaeuble said Jan. 11 the euro is “over the worst of the crisis.”
“The move today is certainly tied to foreign investment, but it’s carrying on a trend that began in China in September with evidence of stabilization and economic recovery,” Geoffrey Dennis, global emerging-markets strategist at Citigroup Inc., said by phone in New York.
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, rose 0.4 percent to $44.66 in New York, after retreating 1.2 percent last week. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, sank 8.9 percent to 16.54.
Banco do Brasil
The Bovespa (IBOV) climbed 0.9 percent, the most since Jan. 4 as Banco do Brasil SA, Latin America’s biggest lender by assets, jumped 3.7 percent. The bank is in talks that may lead to acquisitions in Florida and New Jersey, Paulo Rogerio Caffarelli, vice-president for international business, said in an interview last week. PDG Realty led a rally in Brazilian homebuilders, rising 4.7 percent.
Russia’s Micex Index (INDEXCF) slipped 0.1 percent while Hungary’s BUX Index gained for a fourth day and Turkey’s ISE National 100 Index jumped 1.2 percent to a record close.
“What’s driving the sentiment in central and eastern Europe is the realization that the euro zone is healing,” Aurelija Augulyte, an emerging-markets strategist at Nordea Bank AB in Copenhagen, said by e-mail. “That’s where central and eastern European exports are headed.”
The Shanghai Composite Index rallied 3.1 percent as India’s Sensex climbed 1.2 percent. Abu Dhabi’s ADX General Index (ADSMI) gained 0.9 percent to the highest close since June 19, 2011. Mexico’s IPC Index gained 0.1 percent.
A measure of financial stocks in the MSCI Emerging Markets Index advanced 1.4 percent, the most among 10 industry groups, as Chinese insurers and banks rallied. Energy and utility stocks followed, adding 0.9 percent each.
OAO Surgutneftegas, Russia’s fourth-largest crude producer, added 1.1 percent in Moscow. Grupa Lotos SA (LTS), Poland’s second- biggest oil company, gained 2.5 percent, the most since Jan. 2. OGX Petroleo e Gas Participacoes SA, an oil company controlled by Brazilian billionaire Eike Batista, jumped 3.7 percent in Sao Paulo.
Oil rose to the highest level in almost four months, adding 0.6 percent to $94.14 a barrel after money managers raised net- long positions, or wagers on the U.S. benchmark crude, by 12 percent in the week ended Jan. 8, according to the Commodity Futures Trading Commission’s Jan. 11 Commitments of Traders report. It was the most since Sept. 25.
X5 Retail Group NV (FIVE), Russia’s largest food retailer by revenue, fell 3.9 percent in London, the most since Nov. 28, after the company announced the resignation of Chief Financial Officer Kieran Balfe and two other managers.
Boryszew SA (BRS), the Polish chemical and auto-parts producer controlled by billionaire Roman Karkosik, sank 1.8 percent in Warsaw. The company canceled its 2012 profit forecast because of lower valuations on real estate in Warsaw, according to a regulatory filing Jan. 11.
Aldar Properties PJSC surged 4.5 percent and Sorouh Real Estate Co. rose 3.2 percent on bets Abu Dhabi’s biggest property developers are poised to benefit from about $90 billion in infrastructure spending over the next five years.
The developing-nations index has risen 2.5 percent this month, trailing the 3.1 percent increase in the MSCI World Index (MXWO) of developed-country stocks. The emerging-markets gauge trades at 11 times estimated profit, compared with the MSCI World’s valuation of 13.3 times, according to data compiled by Bloomberg.
“Emerging market equities, as an asset class, are a lot more attractive than in developed markets because, on average, they will deliver relatively stronger earnings growth against a much safer individual country macro and fiscal backdrop,” Chris Weafer, chief strategist at Sberbank Investment Research, said by e-mail today.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell one point, or 0.01 percentage point, to 265 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
The iShares FTSE A50 China Index ETF, a Hong Kong-listed fund that tracks the performance of mainland-traded stocks, jumped 3.4 percent. The Hang Seng China Enterprises Index (HSCEI) of companies listed in Hong Kong added 1.4 percent. appetite for the nation’s assets.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. climbed 0.7 percent as China Lodging Group Ltd. (HTHT) and E-Commerce China Dangdang Inc. (DANG) rose on the prospects of greater foreign investment.
“The major gainer has been the A-share market as a result of the announcement” by regulatory chief Guo, Geoffrey Ng, who helps oversee $1.8 billion as chief executive officer at Hong Leong Asset Management Bhd., said by phone from Kuala Lumpur. “To a certain extent, it has pulled up some of the regional markets.”
China can raise the level of quotas for the Renminbi Qualified Foreign Institutional Investors and the Qualified Foreign Institutional Investors programs, Guo said at a conference in Hong Kong today. RQFII allows offshore yuan in Hong Kong to be invested in mainland securities while QFII permits foreigners to buy yuan-denominated stocks and bonds.
Regulators have since 2003 approved a combined QFII quota of $36.04 billion as of Nov. 30, the Beijing-based State Administration of Foreign Exchange said on Dec. 11. The government scrapped a ceiling on investments by overseas sovereign wealth funds and central banks in its capital markets last month, part of government efforts to encourage long-term foreign ownership and shore up slumping equities.
Haitong Securities advanced 5.5 percent, its steepest increase since Dec. 28, while China Life climbed 2.9 percent, the most since Jan. 2. Guo’s comment boosted insurers, which have investments in publicly traded stocks and brokers that benefit from the prospects of higher volumes.
Environmental shares and drug makers rallied in China as a measurement of air pollution in Beijing exceeded World Health Organization guidelines. Beijing SJ Environmental Protection and New Material Co. jumped 4.2 percent on expectations of increased sales, while Tasly Pharmaceutical Group Co. surged 3.8 percent to a record close.
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