Emerging-market stocks rallied, paring the biggest weekly drop in two months, as countries from Brazil to India signaled they would act to support financial markets. Samsung Electronics Co. drove technology shares higher.
The MSCI Emerging Markets Index increased 1.1 percent to 932.76, trimming its weekly decline to 2.6 percent. Samsung Electronics, the world’s largest smartphone maker, jumped 3.2 percent in South Korea. Tata Motors Ltd. (TTMT), owner of Jaguar Land Rover, climbed 3.1 percent in Mumbai. India’s rupee rebounded from a record low, while the Brazilian real increased the most in almost two years. Homebuilders paced gains in Sao Paulo, driving the Ibovespa to a third weekly advance.
All 10 groups in the benchmark measure for emerging markets gained today, led by technology and industrial companies. Brazil’s central bank stepped up efforts to arrest the world’s worst currency decline, announcing a $60 billion intervention program involving currency swaps and loans. The Reserve Bank of India said yesterday that the nation’s economic and monetary policies must focus on preserving financial stability.
Central bank actions to curb currency depreciation are a “good first stage,” Michael Strauss, who helps oversee about $25 billion of assets as chief investment strategist at Commonfund Group in Wilton, Connecticut, said in a telephone interview today. “They can temper it.”
The gauge of developing nations is trading at 9.9 times estimated earnings, below the valuation of developed markets of 13.7. The iShares MSCI Emerging Markets Index exchange-traded fund added 1.2 percent at $38.65. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slid 5.6 percent to 23.24.
Brazil’s real climbed the most since September 2011. The central bank will auction $1 billion of dollar loans every Friday starting today and offer the equivalent of $500 million worth of foreign-exchange swaps each day Monday through Thursday. The program will run through Dec. 31. The Ibovespa (IBOV) jumped the most among major emerging-market indexes as Rossi Residencial SA led homebuilders higher, offsetting declines among exporters.
The Borsa Istanbul National 100 Index tumbled to the lowest level since October, extending its weekly drop to 8.5 percent. The Micex Index (INDEXCF) slid 0.3 percent, trimming its gain for the week to 0.9 percent. Benchmark stock gauges in Poland and Hungary also dropped today.
India’s S&P BSE Sensex (SENSEX) gained 1.1 percent as Tata Motors extended a two-day rally to 6.2 percent. Bharat Heavy Electricals Ltd., the largest power-equipment maker, soared the most since May 2009. The rupee, which fell to a record 65.56 per dollar yesterday, climbed 2.1 percent.
China’s stocks fell, capping the benchmark index’s first weekly loss in five weeks, as financial companies slumped on concern liquidity is tightening before the end of the month. China Merchants Bank Co. (600036) slid 3.2 percent after saying it plans to raise 34.8 billion yuan ($5.7 billion) in the world’s second-largest share sale this year. South Korea’s Kospi Index (KOSPI) added 1.1 percent as Samsung snapped a five-day slump.
The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.04 percentage point to 345 basis points, according to JPMorgan Chase & Co.
Carmen Reinhart, a Harvard University economist and co-author of a history of debt crises, said emerging markets are deteriorating as the U.S. recovers and may worsen as global interest rates begin to increase.
“It could get very ugly,” Reinhart said today in a Bloomberg Television interview with Sara Eisen from the Federal Reserve’s annual conference in Jackson Hole, Wyoming. “Emerging markets had a capital flow bonanza lasting several years, the golden boom years, and the probability of a banking crisis, the probability of a currency crash, the probability of a default, all increase afterward.”
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