Emerging ETF Rises on U.S. Debt Talks as Brazil Rallies

The iShares MSCI Emerging Markets Index exchange-traded fund rose to a one-month high amid signs of progress in U.S. Senate talks on a debt deal. Brazil’s Ibovespa led gains among major developing-nation indexes.

The developing-nation ETF increased 0.6 percent to $43.08, the highest level since Sept. 18. The MSCI Emerging Markets Index declined 0.1 percent to 1,022.65. The Ibovespa climbed for a fourth day as steelmaker Usinas Siderurgicas de Minas Gerais SA rallied. Hon Hai Precision Industry Co. (2317) drove technology shares lower after KGI Securities Co. reduced its estimates for shipments of Apple Inc. (AAPL)’s iPhone 5C handsets.

U.S. Senate Democratic and Republican leaders said they are optimistic about ending a partial government shutdown and preventing the nation from breaching the debt ceiling in three days. The emerging agreement would suspend the debt limit through Feb. 7, 2014, fund the government through Jan. 15 and require a House-Senate budget conference by Dec. 15, according to a Senate source familiar with the talks, who spoke on condition of anonymity to discuss them.

“It appears as if investors are becoming more comfortable with the idea that politicians will come to terms,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $364 billion, said by phone. “What we’re talking about is a matter of time. It used to be an if, now the question is when. A resolution of this impasse would be positive for the whole food chain, domestic and international.”

Options Prices

The benchmark gauge for developing nations has dropped 3.1 percent this year to trade at 10.7 times projected earnings, compared with the valuation of 14 for the MSCI World Index, according to data compiled by Bloomberg. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, climbed 2 percent to 24.20.

Brazil’s Ibovespa rose for a fourth day as Usiminas followed metals higher. Hypermarcas SA, a manufacturer of consumer products including diapers and generic drugs, rallied to a two-year high after it was rated the equivalent of buy in new coverage at Credit Suisse Group AG.

The Micex Index (INDEXCF) dropped for a second day as the central bank left its main lending rate unchanged and OAO Magnit retreated 2.2 percent. The Budapest Stock Exchange Index declined, while benchmark gauges in Turkey, Poland and the Czech Republic rose.

Chinese Stocks

China’s benchmark stock index rose to a one-month high as railway companies surged on speculation they may help build Thailand’s high-speed train system, offsetting data showing lower exports and faster inflation. CSR Corp. (601766) and China CNR Corp. (601299), the nation’s biggest train makers, jumped by the 10 percent daily limit.

The yuan strengthened to a 20-year high after the central bank set the currency’s reference rate at a record high and as consumer prices advanced the most in seven months.

Hon Hai Precision, a Taiwanese assembler of iPhones, slid the most since June 17 after KGI said it cut its estimates for iPhone 5C shipments in the fourth quarter. TPK Holding Co., another Apple supplier, tumbled 7 percent in Taipei.

Indian (SENSEX) stocks climbed, sending the benchmark index to a one-month high, as a rally in software makers offset a report showing faster-than-estimated inflation. Tata Consultancy Services Ltd. (TCS), the country’s top software exporter, rose to a record, helping a measure of 10 technology stocks advance for the fourth day. The rupee weakened the most in three weeks.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell one basis point, or 0.01 percentage point, to 319 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Zahra Hankir in London at zhankir@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

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

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