Emerging Stocks Halt Five-Day Retreat as Turkey Rallies

Emerging-market stocks snapped a five-day decline as stronger manufacturing data from Turkey to Hungary eclipsed concern a partial U.S. government shutdown will sink shares.

The Mexican IPC index jumped 2.9 percent for the biggest rally since November 2011, while OGX Petroleo & Gas Participacoes SA led gains in Brazil’s Ibovespa (IBOV) Index. Fenerbahce Futbol AS (FENER) led the 2.7 percent surge in the benchmark index in Istanbul. Prague’s PX Index (PX) gained the most in two weeks, while Hungary’s forint added 0.5 percent versus the euro as the September purchasing managers’ index posted the biggest appreciation among peers in emerging Europe and Africa tracked by Bloomberg.

The MSCI Emerging Markets Index climbed 0.9 percent to 996.34 after a five-day decline dragged valuations to a three-week low. Turkish manufacturers reported the fastest pick-up this year, PMI data showed a Chinese factory gauge rose in September from August and Indonesia posted its first trade surplus since March last month. The U.S. government began a partial shutdown for the first time in 17 years after Congress failed to break a partisan deadlock.

“The market is not impressed by the developments in the U.S., but what has been positive was that the official PMI in China did not disappoint much,” Maarten-Jan Bakkum, a senior Maarten-Jan Bakkum, a senior emerging-markets strategist at ING Investment Management in The Hague, said by e-mail. “The doubts about the Chinese recovery caused by some recent data might not be justified.”

China’s Purchasing Managers’ Index came in at 51.1 for September, data showed today, up from 51 in August and below the median estimate in a Bloomberg News survey of 51.6.

ETF Rebounds

The iShares MSCI Emerging Markets Index exchange-traded fund climbed the most in two weeks, increasing 2 percent to $41.57. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, fell 5 percent to 24.44.

Brazil’s Ibovespa gained 1.6 percent. OGX, Eike Batista’s oil and natural gas producer that missed a $45 million payment on dollar bonds today, rallied 14 percent.

The developing-nations measure surged 5 percent in the last quarter, its biggest increase this year, boosted by the U.S. Federal Reserve’s decision to refrain from tapering monetary stimulus and overshadowing concern over an economic slowdown in China. The 21 countries in the developing-nations gauge send about 17 percent of their exports to the U.S., data compiled by the World Trade Organization show.

All ten industry groups in the emerging gauge rose today, led by telecom service companies and financial shares. Markets in China and Hong Kong were shut for holidays.

Overshadowing Concern

“Whatever weakens the U.S. economy would be EM-positive as it would tie Fed’s hands,” Inanc Sozer, economic research manager at Odea Bank AS in Istanbul, said in e-mailed comments.

Turkey’s PMI rose to 54 last month from 50.9 in August, according to the HSBC Holdings Plc index released by Markit Economics. A level above 50 indicates expansion. Turkiye Garanti Bankasi AS (GARAN), the nation’s largest bank by market value, advanced 3.8 percent. The Borsa Istanbul National 100 Index (XU100) ended a seven-day retreat while the lira gained 0.4 percent against the dollar.

The PX Index in Prague climbed 1 percent and Russia’s Micex (INDEXCF) closed little changed.

A decrease of 1.3 percent in the MSCI developing-country index last week dragged valuations to 10.4 times projected 12-month earnings on Sept. 30, compared with a multiple of 14 for the MSCI World Index, data compiled by Bloomberg show. The MSCI Emerging Markets Index is down 5.6 percent this year, versus a 16 percent gain in the gauge of developed-nation shares.

Buying Opportunity

“A window of opportunity to buy at more attractive prices opened up as a consequence of the market’s recent decline,” Jonathan Ravelas, chief market strategist at BDO Unibank Inc. (BDO), said in Manila. “Some investors are betting the consequences of a U.S. shutdown will not be as significant as others fear.”

The U.S. government shutdown is a buying opportunity for stock investors, if history is any guide. The Standard & Poor’s 500 Index (SPX) rose 11 percent on average in the 12 months following a government shutdown, according to data compiled by Bloomberg on the 12 instances since 1976. That compares with an average return of 9 percent over 12 months. In all the cases, the U.S. equity benchmark was higher by the end of the next two years.

PT Kalbe Farma (KLBF), Indonesia’s largest drugmaker, jumped the most since Aug. 29. The Jakarta Composite Index rose 0.7 percent. The nation’s August trade surplus beat a forecast $810 million deficit in a Bloomberg survey.

Stocks in Thailand (SET) surged 1.8 percent while the S&P BSE Sensex (SENSEX) of Indian shares added 0.7 percent after data released yesterday showed the nation’s current-account deficit widened less than economists estimated for the quarter ended June 30.

To contact the reporters on this story: Ian Sayson in Manila at isayson@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

To contact the editor responsible for this story: Daliah Merzaban at dmerzaban@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.