Emerging-market stocks joined currencies higher, rallying the most in 10 months, as Federal Reserve Chairman Ben S. Bernanke said the economy will continue to need stimulus while bets grew that China will bolster growth.
The MSCI Emerging Markets Index added 3 percent to 942.88, the biggest gain since Sept. 14. The Shanghai Composite Index (SHCOMP) capped the biggest two-day gain in 18 months as financial companies rallied. Brazil’s Ibovespa gained and shorter-term swap rates declined as policy makers damped speculation they would step up the pace of interest-rate increases. The Bank Indonesia raised its key rate to bolster the rupiah, which touched the weakest level since 2009. South Korea’s won jumped the most since December 2011 and government bonds climbed.
Stocks joined a global rally as Bernanke called for maintaining accommodation even as the minutes of policy makers’ June meeting showed them debating whether to stop bond buying by the Fed in 2013. Chinese premier Li Keqiang said in a speech this week that the nation’s economic growth and employment must stay above a certain floor, according to Nomura Holdings Inc.
“Sentiment is much better today, driven by the somewhat ’longer’ liquidity outlook,” Martial Godet, head of emerging-markets strategy at BNP Paribas SA in London, said by e-mail. “Markets are still very much liquidity addicted.”
The iShares MSCI Emerging Markets Index exchange-traded fund surged 4.9 percent to $39.36. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, declined 5.2 percent to 25.60.
Commodity, technology and financial shares, which are most-dependent on the pace of economic growth, led gains among the 10 groups in the MSCI Emerging Markets Index. The broad measure has slumped 11 percent this year, compared with a 12 percent jump in the MSCI World Index. The developing-nation gauge trades at 9.9 times projected earnings, lower than the MSCI World’s valuation of 13.8, according to data compiled by Bloomberg.
Brazil’s Ibovespa (IBOV) gained the most in a month, led by mining company Vale SA, as metal prices rose. Commodities producers account for about 37 percent of the gauge’s weighting. The real rose 0.4 percent. Policy makers raised the target lending rate yesterday and repeated the language used after the previous meeting, a sign they won’t quicken the pace of rate increases, according to David Beker, an economist at Bank of America Corp.
The Micex Index (INDEXCF) jumped 2.6 percent in Moscow to the highest level since May 28. OAO Sberbank, the country’s biggest lender, jumped 4.4 percent, while OAO Gazprom advanced 3.2 percent. Benchmark gauges in the Czech Republic, Poland and Turkey (XU100) advanced, while Hungarian stocks retreated.
The Shanghai Composite rose 3.2 percent, while the Hang Seng China Enterprises Index capped its biggest gain since Jan. 2. Industrial Bank Co. (601166) jumped 10 percent as a gauge of financial companies in the CSI 300 Index gained the most since March 2009.
The won posted the biggest rally since December 2011 as the Bank of Korea kept its benchmark interest rate unchanged as it boosted its forecast for 2014 growth to the fastest pace since the global economy rebounded from a recession in 2010. Indonesia’s rupiah touched the weakest level since September 2009. India’s rupee was little changed after climbing as much as 0.5 percent, while the S&P BSE Sensex increased 2 percent at the close in Mumbai.
Egyptian bonds gained for a second day, sending yields to the lowest level in five weeks, as $12 billion of aid pledges from the Persian Gulf eased concern that the army-backed government will struggle to revive the economy.
The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.06 percentage point to 338 basis points, according to JPMorgan Chase & Co.