Emerging Stocks Rise to 6-Week High on China as Lira Advances

Emerging-market stocks rose, sending the benchmark index to a six-week high, as investors speculated China’s government will boost spending to maintain growth of at least 7 percent. Turkey’s lira gained after the central bank raised its overnight lending rate.

ZTE Corp. (763), China’s second-largest maker of equipment for phone networks, jumped 20 percent in Hong Kong after profit gained. OAO Magnit, Russia’s largest food retailer, climbed to a record after earnings beat estimates. Cia. Siderurgica Nacional SA led gains in Brazilian steelmakers. Indonesia’s rupiah plunged 1.3 percent, the most in 13 months, against the dollar in onshore trading as Bank Indonesia allows a more rapid slide toward levels quoted in the offshore market.

The MSCI Emerging Markets Index added 1.6 percent to 969.04, the highest since June 10. Benchmark gauges in China, South Korea, Taiwan and Thailand climbed more than 1 percent, while the MSCI All-Country World Index lost 0.1 percent. Chinese Premier Li Keqiang said the country’s “bottom line” for economic growth is 7 percent, Beijing News reported today, citing comments at a recent meeting with economists and businessmen.

The Chinese comments are “very bullish for emerging-market equities,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., said in a phone interview. His firm oversees about $130 billion. “They’re sending a message that China will support economic growth, and that emboldens risk-taking and future forecasts for global growth.”

Gauges of financial and technology companies in the MSCI Emerging Markets Index advanced at least 1.9 percent, the most among 10 industry groups. ZTE jumped the most since 2008 after first-half net income rose 23 percent from a year earlier.

Magnit Climbs

The iShares MSCI Emerging Markets Index exchange-traded fund climbed 1.1 percent to $40.10. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 4.7 percent to 22.09.

Brazil’s Ibovespa (IBOV) climbed 0.5 percent to a one-month high as CSN, as Cia. Siderurgica is known, rose 3 percent. MMX Mineracao & Metalicos SA surged 12 percent, leading gains among companies controlled by Brazilian billionaire Eike Batista.

The IPC index jumped 1.7 percent in Mexico City, the best performer among major gauges in the Americas. Mining company Minera Frisco SAB rose 6.2 percent, snapping seven days of declines.

Magnit climbed 5.8 percent in Moscow after reporting second-quarter net income rose 48 percent from the same period last year. OAO Severstal (CHMF), Russia’s second biggest steel-maker, added 3.4 percent after posting a 5 percent advance in second-quarter steel output. The Micex Index rose 0.1 percent.

Forint Retreats

Turkey’s lira strengthened 0.6 percent and the yield on 10-year lira notes dropped five basis points to 8.71 percent. The central bank raised its overnight lending rate by 75 basis points, more than the 50 basis-point median estimate predicted in a Bloomberg survey of economists.

The Borsa Istanbul Stock Exchange National 100 Index fell 0.6 percent after earlier rising as much as 1.8 percent.

The forint slipped 0.5 percent versus the euro. Hungary’s central bank cut its main interest rate to 4 percent from 4.25 percent, matching the forecast of all 21 economists in a Bloomberg survey.

The MSCI Emerging Markets gauge has lost 8.2 percent this year and trades at about 10.1 times its 12-month projected earnings. The MSCI World Index of developed nations has gained 14 percent in 2013 and trades at 13.9 times, according to data compiled by Bloomberg.

Railway Investment

The Shanghai Composite Index added 2 percent while the Hang Seng China Enterprises Index (HSCEI) of mainland companies traded in Hong Kong surged 3.9 percent, the most in more than six months. CSR Corp. and China Railway Construction (1186) Corp. rallied more than 7 percent after China Business News said state-run China Railway Corp. may increase investment for railway construction this year.

Zoomlion Heavy Industry Science and Technology Co., China’s second-largest construction equipment maker, jumped 9.3 percent, the steepest increase since December 2011.

Benchmark gauges in Indonesia and the Philippines gained at least 1.7 percent, while Indian stocks added 0.7 percent.

The South Korean won strengthened 0.1 percent after the government said it is looking to cut a home-purchase tax and as foreign investors bought more local stocks than they sold.

Solar Companies

Neo Solar Power Corp. (3576) surged 3.6 percent in Taipei while Motech Industries Inc. (6244) added 3.5 percent. The Commercial Times reported that the island’s photovoltaic companies will benefit from trade rifts among China, the U.S. and the European Union.

Hyundai Hysco Co. (010520) jumped 5.8 percent in Seoul, leading South Korean steelmakers higher. Steelmakers are considering increasing prices of major steel products after China made similar moves yesterday, Kim Chang Ho, analyst at Kiwoom Securities Co., said in Seoul.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell two basis points, or 0.02 percentage point, to 305 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified 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; Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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