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Emerging ETF Rallies as U.S. Data Outweigh Missile Test

The iShares MSCI Emerging Markets Index exchange-traded fund posted the longest rally in three weeks as U.S. manufacturing data bolstered confidence in global growth. Stocks in Turkey (XU100) and Dubai sank as an Israeli missile-defense test provoked concern about regional tensions.

The developing-nation ETF added 0.6 percent to $38.26, gaining for a fourth day. The MSCI Emerging Markets Index declined 0.5 percent to 933.94. China’s stocks jumped as Premier Li Keqiang said he’s confident the country will achieve this year’s economic goals. Dubai’s DFM General Index and The Borsa Istanbul National 100 Index slid more than 2.2 percent. Turkey’s lira sank to a record low and India’s rupee fell amid higher oil prices and concern about a credit-rating downgrade.

The Institute for Supply Management’s manufacturing index increased to 55.7 in August from 55.4 a month earlier, beating the median forecast of 85 economists surveyed by Bloomberg of 54. Stocks were briefly rattled by what Israel described as a joint flight test with the U.S. of its Arrow missile-interception system over the Mediterranean Sea. House Speaker John Boehner said he will support U.S. President Barack Obama’s call for action against Syria.

“Manufacturing is starting to look better,” Phil Orlando, New York-based chief equity strategist at Federated Investors, which manages about $380 billion in assets, said by phone. “There are a number of issues on the horizon that give us pause. Some of these issues, particularly the Middle East, are getting priced into the markets because of these increased geopolitical risk concerns.”

Options Prices

The MSCI Emerging Markets Index extended this year’s plunge to 11 percent, compared with an 11 percent advance for a measure of developed markets. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 0.8 percent to 28.36.

Brazil’s Ibovespa snapped a three-day rally as Cia. de Bebidas das Americas, the Brazilian unit of Anheuser-Busch InBev NV, tumbled. The real gained, reversing earlier losses, after Treasury Secretary Arno Augustin told reporters that the government will keep working to avoid excessive depreciation.

The IPC index declined for the first time in three days as Credit Suisse Group AG said it’s ‘premature’ to move into Mexican stocks. Grupo Financiero Santander Mexico SAB sank the most on the gauge.

The Micex Index (INDEXCF) rose for a second day in Moscow as M.video, Russia’s biggest electronics retailer, surged 4.4 percent. The Borsa Istanbul National 100 Index dropped 2.3 percent, while the lira depreciated 1.9 percent per dollar.

Higher Forecast

China’s stocks rose to a 10-week high as Goldman Sachs Group Inc. boosted its forecast for the nation’s expansion in 2013. Industrial Bank Co. and Poly Real Estate Group Co. (600048) surged more than 4 percent to lead a rally for lenders and developers.

BYD Electronic International Co. and Compal Communications Inc. led gains of Nokia Oyj (NOK1V)’s Asian suppliers after Microsoft Corp. offered to pay 5.44 billion euros ($7.2 billion) for the Finnish company’s handset business. Samsung Electronics Co. (005930) declined 1 percent.

India’s currency and stocks plunged the most in Asia after Standard & Poor’s reiterated it sees more than a one-in-three chance that the nation’s debt rating will be cut within two years. Brent crude jumped after Russian news service RIA Novosti reported the detection of a missile launch in the central Mediterranean. The missile launch was a test, the Israeli Defense Ministry said. Asia’s No. 3 economy imports almost 80 percent of its oil. The rupee slid 2.6 percent.

Rupiah Tumbles

Indonesia missed its target at a local-currency sukuk sale today for the first time since July, as investors favored the relative safety of shorter-dated debt. The rupiah fell beyond 11,000 per dollar for the first time since 2009 on concern the nation will struggle to rein in a record current-account gap. The Jakarta Composite Index jumped 1.5 percent.

Dubai’s DFM General Index (DFMGI) lost 3.7 percent to the lowest level since July 16. Abu Dhabi’s benchmark index lost 1.8 percent. Emaar Properties PJSC (EMAAR), the developer of the world’s tallest tower, slid 5.4 percent. Israel’s TA-25 Index and the shekel snapped four-day rallies.

The premium investors demand to own emerging-market debt over U.S. Treasuries slid seven basis points, or 0.07 percentage point, to 351 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net; Sharon Cho in Seoul at ccho28@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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