Emerging Stocks Advance After India Eases Liquidity Curbs

Emerging-market stocks rose for a second day, led by financial companies, as India’s benchmark equity gauge jumped to a three-year high after the nation’s central bank took steps to boost cash supply for lenders.

The MSCI Emerging Markets Index added 0.2 percent to 1,036.76, extending its monthly advance to 5 percent. ICICI Bank Ltd. (ICICIBC) jumped 5.9 percent, driving India’s S&P BSE Sensex to the highest level since November 2010. The PX index led gains among major developing-nation gauges as political parties promising to raise company taxes failed to gain control of the Czech parliament in general elections. The won approached a two-year high as South Korea’s current-account surplus widened.

The Reserve Bank of India cut the marginal standing facility rate to 8.75 percent from 9 percent, making short-term funds cheaper for banks. The cost was raised in July in an emergency move to stem the drop in the currency. India’s central bank also raised key borrowing costs to fight accelerating inflation. The Federal Reserve begins a two-day meeting to consider whether to start trimming its bond purchases.

“There are bits of news that are helping individual markets, such as in India and the Czech Republic, and when put into the greater EM context, markets are receptive to that positive news,” John Lomax, emerging-market strategist at HSBC Securities Inc., said by phone from London. “The big story is how easy monetary policy will be -- not necessarily when tapering may occur -- as this will help current-account deficit countries which are supported by low U.S. rates.”

Monthly Move

The gauge for developing nations was poised for a second monthly advance, the longest winning streak since January. It trades at 10.7 times projected earnings, compared with the valuation of 14.4 for the MSCI World Index.

The iShares MSCI Emerging Markets Index exchange-traded fund advanced 0.3 percent to $43.14. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, decreased 0.2 percent to 20.82.

Brazil’s Ibovespa fell from a one-week high as Eike Batista’s OGX Petroleo e Gas Participacoes SA sank after ending talks with bondholders without an agreement, outweighing gains by lender Itau Unibanco Holding SA. Plane builder Embraer SA (EMBR3) dropped after JetBlue Airways Corp. said it will defer purchases of 24 aircraft. Itau led financial stocks higher after posting profit that exceeded analysts’ estimates.

Russia, India

Russian shares rallied for a third day as OAO Bashneft climbed 5 percent after the oil producer recommended a debut interim dividend, restoring investor returns after the latest full-year payout was cut. The PX index jumped 2.7 percent, the most since January 2012. Komercni Banka AS, a unit of Societe Generale SA, increased 4.1 percent to a record.

India’s S&P BSE Sensex added 1.7 percent, following a five-day decline. ICICI Bank surged to its highest level since July 2. State Bank of India advanced 3.9 percent, driving the S&P BSE Bankex Index to its highest close since July 15.

China’s stocks declined and money-market rates climbed to the highest levels since July as the central bank’s first injection of funds in two weeks failed to alleviate a cash squeeze. The Shanghai Composite Index slipped 0.2 percent after advancing as much as 1.4 percent earlier today.

The won also advanced after Trade Minister Yoon Sang Jick said Asia’s fourth-largest economy will likely post record exports in October, before figures due Nov. 1.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose two basis point, or 0.02 percentage point, to 316 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Zahra Hankir in London at zhankir@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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