Emerging ETF Caps Longest Rally Since 2007 on China Trade

The iShares MSCI Emerging Markets Index exchange-traded fund capped the longest advance in more than six years after data showed Chinese exports grew more than estimated. Brazil’s Ibovespa entered a bull market.

The developing-nation ETF added 2.7 percent to $41.04, rising an eighth day, in the longest winning stretch since July 2007. The MSCI Emerging Markets Index rose 1.9 percent to 973.79, the highest level since June. Benchmark gauges from China to Thailand and Turkey gained more than 3.3 percent, while Russia’s Micex Index (INDEXCF) advanced for a sixth day. Brazil’s Ibovespa extended a surge from its July low to 20 percent.

Stocks joined a global rally after data showed China’s exports rose more than estimated in August and inflation stayed below a government target, helping Premier Li Keqiang sustain a rebound in the second-largest economy from a two-quarter slowdown. Russia sold its first sovereign bonds in euros, along with dollar debt, lured to the 17-nation common currency by the prospect of interest rates staying at record lows.

“We’ve seen some good economic data coming out of China,” Timothy Ghriskey, the chief investment officer at Solaris Group LLC in New York, which manages over $1.5 billion, said by phone. “This is certainly another positive development that perhaps we’re seeing overall growth improve.”

All 10 industry groups in MSCI’s emerging-markets gauge rose, led by commodity companies. The broad measure has climbed 4.3 percent in four days, trimming this year’s drop to 7.7 percent, compared with a 13 percent increase in the MSCI World Index. The developing-nation index trades at 10.4 times projected 12-month earnings, trailing the MSCI World’s 13.8, according to data compiled by Bloomberg.

Price Swings

The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, added 0.3 percent to 26.29. Twenty out of the 24 developing-nation currencies tracked by Bloomberg gained, led by the Brazilian real.

Brazil’s Ibovespa entered a bull market, led by iron-ore producer Vale SA. OGX Petroleo e Gas Participacoes SA tumbled after saying founder Eike Batista is challenging its decision to exercise a put option requiring him to inject as much as $1 billion into the oil company. The real advanced 1.3 percent, after gaining 3.4 last week, the most since January 2012.

The Micex Index capped the biggest rally since December as improving Chinese data boosted appetite for metal producers. OAO Uralkali, the nation’s biggest potash producer, surged.

Bond Sale

The Russian government raised 725 million euros ($962 million) of seven-year euro-denominated securities and is selling $6 billion of dollar bonds, according to a person with direct knowledge of the sale, who asked not to be identified as the information isn’t public.

The Borsa Istanbul National 100 Index jumped 3.7 percent, the most among major emerging-market gauges, as Akbank TAS (AKBNK) and Turkiye Halk Bankasi AS (HALKB) rallied. Benchmark measures in Poland and the Czech Republic added at least 0.5 percent, while Hungarian shares retreated for a fourth day.

The Shanghai Composite Index rose 3.4 percent, the biggest gain since Dec. 14. Shanghai Pudong Development Bank (600000) jumped 10 percent as investors speculated lenders will be allowed to issue preferred shares to boost capital.

Malaysia’s ringgit climbed 1.1 percent after China’s trade data brightened the outlook for the exports. Thailand’s SET Index surged 3.6 percent, while the Jakarta Composite Index rallied 2.9 percent.

More Losses

Wall Street’s biggest firms are predicting intensifying bond losses in emerging markets, where borrowing costs have already soared to the highest in more than four years versus U.S. corporate debt, as the Fed considers curtailing stimulus.

“We’re not yet convinced that we’ve seen the worst in terms of flows out of emerging markets,” Jeffrey Rosenberg, the chief investment strategist in fixed-income at New York-based BlackRock Inc., the world’s largest asset manager, said in a telephone interview, expressing his own views.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 345 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Maria Levitov in London at mlevitov@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: Tal Barak Harif at tbarak@bloomberg.net

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