Emerging ETF Gains on Cheap Valuations as Brazil Rebounds

The iShares MSCI Emerging Markets Index exchange-traded fund rose, rebounding from a 10-week low, as the cheapest developing-nation stocks since December lured investors while Brazilian and Russian shares gained.

OAO Gazprom, the world’s biggest natural gas producer, climbed for the first time in three days while pulpmaker Suzano Papel & Celulose SA jumped in Sao Paulo. Daelim Industrial Co. (000210) added 4.3 percent after Woori Investment & Securities Co. said the South Korean builder’s order margin may recover. Tencent Holdings Ltd. (700), China’s largest Internet company, slipped the most since Dec. 3 in Hong Kong. Brazil’s Bovespa index advanced for the first time in eight days.

The iShares ETF, which tracks equities including Samsung Electronics Co. and America Movil SAB, gained 0.4 percent to $43.28 in New York, paring a weekly slump of 1.6 percent. MSCI Inc.’s Emerging Markets Index (MXEF) was little changed at 1,053.39, as 429 stocks rose while 343 declined. The gauge, which had its worst weekly drop since November, trades at 10.2 times estimated earnings, the cheapest level since Dec. 21, according to weekly data compiled by Bloomberg.

“While valuations have turned attractive, there are no strong catalysts,” Kim Dae Young, a fund manager at KB Asset Management Co., which manages about $28 billion in assets, said by phone from Seoul. “Recent correction could continue in the short term.”

Business confidence in Germany, Europe’s largest economy, rose more than economists forecast to a 10-month high of 107.4 in February, according to the Munich-based Ifo institute. That’s the biggest increase since July 2010 and the fourth straight monthly gain. Economists surveyed by Bloomberg predicted an advance to 104.9.

‘Steady’ Inflows

The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, fell 2.9 percent to 17.67.

Emerging-market funds continued to receive “steady” inflows for the 24th week, Markus Rosgen and Yue-Hin Pong, analysts at Citigroup Inc., wrote in a report today, citing data compiled by research firm EPFR Global.

The MSCI Emerging Markets Index tumbled the most in seven months yesterday, erasing 2013 gains, after Federal Reserve meeting minutes sparked concern the U.S. may curtail stimulus.

Pulpmakers Suzano and Fibria SA rose at least 4 percent in Sao Paulo, pushing the Bovespa index 1 percent higher. BRF- Brasil Foods SA (BRFS3), Brazil’s largest food maker, jumped 5.1 percent, the most since August 2011, after its board nominated Abilio Diniz as chairman. Diniz is also chairman of Cia. Brasileira de Distribuicao Grupo Pao de Acucar.

Mexico’s IPC Index fell 0.6 percent today. Homebuilders Urbi Desarrollos Urbanos SAB and Corp. Geo SAB plunged at least 13 percent after Fitch Ratings said it may cut the companies’ credit ratings.

Micex Climbs

The Micex Index (VTBMICX) added 0.2 percent in Moscow, the first advance in three days, with trading volumes 44 percent less than the 30-day average. Gazprom, Russia’s natural-gas export monopoly, climbed 0.7 percent. OAO Rosneft, Russia’s largest oil producer, added 0.4 percent. The ruble lost 0.2 percent.

The Czech Republic’s PX Index climbed 0.7 percent, rebounding from its biggest drop in a week yesterday. CEZ AS, the largest Czech utility, jumped 1 percent after Hospodarske Noviny newspaper reported CEZ and Czech Coal sign “within days” an agreement on deliveries.

The Czech koruna slipped for a third day, while the Indian rupee rallied the most in more than three weeks versus the dollar. The rupee rose on optimism slowing inflation and prospects of an economic revival will attract capital inflows.

Health Stocks

A gauge of health-care stocks jumped 1.2 percent, leading gains among 10 industry groups in the MSCI Emerging Markets Index. Technology shares dropped 0.6 percent, the biggest decline. The broader gauge has fallen 0.2 percent this year, compared with a 4.8 percent gain in the MSCI World Index of developed nations. Companies on the MSCI World trade at 13.2 times estimated profit.

The Shanghai Composite declined 0.5 percent to post the biggest weekly loss since May 2011 as higher home prices boosted concern the government will adopt tighter policies to prevent asset bubbles. South Korea’s Kospi index rose 0.2 percent. Thailand’s SET Index rose 0.8 percent.

Trading volume for the Shanghai gauge was 27 percent lower than its 30-day average, data compiled by Bloomberg show. Volume was 50 percent more for the Jakarta Composite Index, which rose 0.4 percent.

Daelim Industrial advanced the most since Jan. 16 after Woori Investment said the company’s order margin will recover this year. Samsung Techwin Co. (012450), a South Korean defense equipment maker, jumped 6.2 percent, the steepest advance in the MSCI Emerging Markets Index.

Technology Shares

Samsung Electronics (005930), the stock with the biggest weight on the emerging markets gauge, fell 1.3 percent, the most since Jan. 28, leading technology shares lower after a report yesterday showed euro-area services and manufacturing contracted at a faster pace than economists forecast in February. LG Display Co. (034220), the world’s second-largest maker of liquid-crystal displays, lost 0.8 percent.

Tencent Holdings lost 2.7 percent, its second day of declines. The company has sought ID card details from official account WeChat users who send feeds to followers, according to its website. China passed rules Dec. 28 requiring people to identify themselves when signing up for Internet and phone services as the government tightens control over the world’s largest population of Web users.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 284 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Lyubov Pronina in London at lpronina@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net; Darren Boey at dboey@bloomberg.net

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