Emerging-market stocks rebounded from the lowest level in a week on prospects of improved earnings for companies Koc Holding AS (KCHOL), Dubai Financial Market PJSC (DFM) and OAO Gazprom. Asian shares retreated.
Koc, Turkey’s biggest industrial group, climbed to a record as Dubai Financial led the benchmark DFM General Index (DFMGI) to a two- year high. Gazprom, the world’s biggest natural-gas producer, drove gains in Russia’s Micex index. Brazil’s Bovespa rose to a two-week high as the central bank signaled borrowing costs would remain at a record low. Shares fell in Shanghai (SHCOMP) for a second day ahead of China’s fourth-quarter growth figures.
The MSCI Emerging Markets Index (MXEF) rose 0.2 percent to 1,073.15 in New York. Koc said it targeted a 6 percent profit increase while investors expected the emirates’ biggest companies to report improved full-year earnings as the region’s economy recovers from a property market crash that started in 2008. Gazprom said profit doubled in the third quarter. Data released today in the U.S. showed signs of an improved labor and housing market.
“Some of the earnings recently have been absolutely fantastic,” Gavin Redknap, an emerging-markets strategist at Nikko Asset Management, said by phone from London. “If we’re in a situation where monetary policy is relatively loose across the globe and economic data is improving, that’s clearly good for equity markets.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, gained 0.6 percent to 44.68, the highest level in a week. 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 1.4 percent to 17.
Initial jobless claims in the U.S. fell more than forecast last week to the lowest level in five years, Labor Department figures showed today, signaling further improvement in the nation’s labor market. December housing starts unexpectedly jumped to a four-year high, the Commerce Department reported.
“Improvement in the underlying data in the U.S. helps revive the country, which remains the driver of the global economy along with China,” Redknap said.
The 21 nations in MSCI’s developing-nations gauge send about 17 percent of their exports to the U.S. and 26 percent to the European Union on average, data compiled by the World Trade Organization show.
The Thai baht climbed to the highest level since Aug. 2011 against the dollar after Finance Minister Kittiratt Na-Ranong said the exchange rate is “not at a good level” and exporters will face difficulties should it strengthen further. Thailand joined a growing chorus of developing nations expressing alarm at the rapid appreciation of their currencies as increased monetary easing in the U.S. and Japan spurs demand for higher- yielding assets.
The Bloomberg-JPMorgan Asia Dollar Index is headed for a record eighth monthly gain while currencies in Colombia, Poland and Romania gained at least 0.5 percent against the dollar.
The Bovespa (IBOV) climbed 0.7 percent to the highest level since Jan. 4 after the central bank board kept the benchmark interest rate at 7.25 percent for a second straight meeting yesterday, even as inflation exceeded economists’ estimates for the sixth straight month in December. In the statement accompanying the unanimous decision, policy makers reiterated that the best strategy is to keep monetary policy conditions unchanged for a “prolonged period.”
Online retailer B2W Cia. Global do Varejo rose 6.2 percent to a two-week high as companies that sell in the domestic market jumped. Meatpacker Marfrig Alimentos SA climbed 7.1 percent, the biggest advance in five months, to lead gainers in Sao Paulo.
“The monetary policies across the globe are super accommodating and positioning in equities remains amazingly light,” Joseph Dayan, head of markets at BCS brokerage in London, said by e-mail. “Investors are moving up the risk ladder.”
Emerging-market equities have the “most upside” potential among asset classes, with the developing-nations gauge set to rise as much as 28 percent this year, HSBC Holdings Plc estimated in a report dated Jan. 15.
The MSCI Emerging Markets Europe, Middle East and Africa Index advanced 0.8 percent in New York, the most in two weeks.
Russia’s Micex Index climbed 0.6 percent during the day, with OAO Aeroflot gaining 3.1 percent. Turkey’s ISE National 100 Index added 0.9 percent, rising for a fifth day, and the lira gained to the strongest level versus the dollar since February as investors speculated that Moody’s Investors Service will upgrade the country’s credit rating.
“Turkey has a fantastic period,” Maarten-Jan Bakkum, an emerging-market strategist at ING Investment Management in The Hague, said by e-mail. “Fundamentals remain good while flows are still strong and return momentum the best in the world.”
Hungary’s BUX Index (BUX) surged 1.7 percent for the highest close since Feb. 8, and the forint strengthened 1 percent against the euro, the most since Nov. 19. Hungary’s minister in charge of aid talks with the International Monetary Fund, Mihaly Varga, said the currency should be stabilized in a stronger range, Budapest-based HirTV reported.
India’s benchmark stock index rose 0.7 percent after the government allowed oil companies to increase diesel prices as it seeks to reduce the fiscal deficit.
The Shanghai Composite Index slid 1.1 percent after valuations reached the highest level since May earlier this week. The Hang Seng China Enterprises Index (HSCEI) dropped 0.4 percent. China will probably report tomorrow that the economy expanded 7.8 percent in the fourth quarter from a year earlier, up from a three-year low of 7.4 percent, according to a Bloomberg economist survey.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. added 0.1 percent to 101, led by Internet software developer Qihoo 360 Technology Co.
“Investors want to see more earnings and economic data before taking any more equity holdings,” Chakrit Puechpan, the head of domestic equities at MFC Asset Management Pcl, which oversees about $8 billion, said by phone from Bangkok. “China’s recovery is already priced in.”
Taiwan’s Taiex Index lost 1.1 percent, the most since Nov. 13. Vietnam’s VN Index (VNINDEX) declined 1.8 percent from an eight-month high.
The MSCI Emerging Markets/Utilities Index climbed 0.7 percent, the best performance among the 10 industry groups in the broader index, followed by consumer staple companies. A gauge of technology companies decreased 0.5 percent, as Samsung Electronics Co. (005930) fell to its lowest price in a month.
Gazprom rose 0.8 percent in Moscow. Net income climbed to 305 billion rubles ($10.1 billion) from 152 billion rubles a year earlier, the energy company said today on its website. That compared with an average estimate of 291 billion rubles from 10 analysts surveyed by Bloomberg. Revenue reached 1.12 trillion rubles.
OAO MegaFon, a Russian mobile operator, jumped 3.5 percent to a record close in Moscow. MegaFon’s depositary receipts added 3.5 percent to $26.3 in London. Citigroup put MegaFon on its CEEMEA Focus List after Dalibor Vavruska, a London-based analyst, started coverage of the stock with a buy rating and price estimate of $28.50 per depositary receipt.
Koc jumped 3 percent in Istanbul to the highest close since at least 1995. The company is also targeting 6 percent growth in 2013 consolidated sales.
Samsung Electronics, the world’s largest maker of mobile phones and TVs, fell 1.5 percent to its lowest close since Dec. 21. Reports of Apple Inc.’s lower-than-expected iPhone 5 sales have raised concerns about the smartphone market, said Lee Seung Woo, analyst at IBK Securities Co.
The developing-nations measure has added 1.7 percent this year, trailing a 3.6 percent increase by the MSCI World Index. The emerging-markets index trades for 10.9 times estimated profit, compared with the MSCI World’s multiple of 13.4, data compiled by Bloomberg show.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell five basis points, or 0.05 percentage point, to 261 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
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