Emerging-market stocks gained for a third day after a gauge of Chinese services industries rose. The real fell the most in a week after Moody’s Investors Service lowered Brazil’s rating outlook.
The MSCI Emerging Markets Index added 0.7 percent to 1,005.25 in New York. Benchmark measures in Turkey (XU100) and India rose more than 1.4 percent, while China Unicom (Hong Kong (HSCEI)) Ltd. and China Telecom Corp. jumped at least 7 percent in Hong Kong after a report said the government may cut mobile interconnection fees. Brazil’s Ibovespa was set for the biggest weekly slump in a month and the real lost 0.7 percent.
A Chinese services-industry index rose to a six-month high, adding to signs that the world’s second-biggest economy will sustain a rebound after a two-quarter slowdown. The iShares MSCI Emerging Markets exchange-traded fund slid for the first time in three days as data showed weaker-than-forecast growth in service industries and concern grew that the U.S. political impasse may lead to a recession. The EM gauge trades at 11.4 times estimated earnings, a 23 percent discount to the developed-market index.
“Investors are increasing exposure to emerging markets as they offer more growth potential,” Brian Jacobsen, who helps oversee $226 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said by phone today. “I don’t expect anything happening in the U.S. to change that trajectory. It’s not going to reduce revenue for emerging markets companies.”
All 10 industry groups in the MSCI Emerging Markets Index climbed, with technology, health care and financial companies adding more than 1 percent. Stock exchanges in China and South Korea are closed for holidays.
The emerging-market ETF fell 0.4 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, rose 2.8 percent to 25.41.
The Chinese services index increased to 55.4 in September from 53.9 in August, the Beijing-based National Bureau of Statistics and Federation of Logistics and Purchasing said today. The level of 50 indicates an expansion, adding to signs that the world’s second-biggest economy will sustain a rebound after a two-quarter slowdown.
The S&P BSE Sensex Index jumped 2 percent in Mumbai, the most in two weeks, as materials producers and consumer companies climbed amid speculation a strengthening rupee will lure foreign investors. The Indian currency appreciated 1.2 percent to 61.74 to the dollar, the biggest advance among 24 emerging-market peers monitored by Bloomberg.
Turkiye Garanti (GARAN) Bankasi AS, the largest Turkish lender by market value, led gains on the Borsa Istanbul National 100 Index, which rose 1.5 percent. Garanti climbed 1.3 percent after slumping 4.1 percent to the lowest level since Sept. 13 yesterday. The government is selling $1.25 billion of five-year Islamic bonds today, according to a person with direct knowledge of the transaction, who asked not to be identified because the information is private.
PDG Realty SA Empreendimentos e Participacoes led homebuilders lower in Sao Paulo. The stock fell 4.1 percent while the BM&FBovespa Real Estate Index snapped a two-day advance. Cia. Energetica de Sao Paulo, the power utility known as Cesp, dropped 3 percent, the lowest closing level since Sept. 4. Credit Suisse Group AG cut its recommendation on the stock to the equivalent of hold.
The MSCI Emerging Markets Index has lost 4.7 percent this year, compared with a 15 percent gain in the MSCI World Index of developed-nation shares. The developing-country gauge trades at 11.4 times projected 12-month earnings, below the 14.8 multiple for the MSCI World, data compiled by Bloomberg show.
“There is a window of opportunity for global emerging markets to stage a rebound after a challenging few months,” Benoit Anne, the head of emerging-markets strategy at Societe Generale SA in London, said by e-mail. “I particularly like EM fixed income, where I think there are some interesting pockets of value. Russia OFZ is a good example,” he said, referring to the ruble-denominated government bonds.
The yield on Russian securities due in January 2023, which fell 5 basis points to 7.26 percent today, is up 78 basis points since its 2013 low in May.
The Philippine peso advanced the most since Sept. 19 after Moody’s raised the nation by one level to Baa3, the lowest investment grade, with a positive outlook. The country won investment-grade credit scores from Standard & Poor’s and Fitch Ratings earlier this year.
Moody’s lowered Brazil’s rating outlook to stable from positive, citing deteriorating debt and investment ratios and evidence the economy is going through a lower-growth period.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 1.8 percent, the most since Sept. 9. Unicom, the nation’s second-largest mobile carrier, jumped the most since August 2011 and China Telecom posted its biggest rally since 2008. The companies may see their interconnection fees for calls through China Mobile Ltd. (941) halved, the Economy & Nation Weekly reported today, citing a person it didn’t identify.
“Emerging markets are doing well on the back of strong service PMI in China, Philippines upgrade to investment grade” by Moody’s Investors Service, Michael Ganske, the head of emerging markets at Rogge Global Partners Plc in London, said by e-mail. “A long-term U.S. shutdown or even a technical default is not priced or even considered for the time being.”