Emerging Stocks Rally Third Day on China Policies as Rupee Gains

Emerging-market stocks rose for a third day after China vowed to carry out the broadest expansion of economic freedoms since at least the 1990s. The rupee led gains in developing-nation currencies.

Citic Securities Co. and Haitong Securities Co. surged more than 10 percent in Hong Kong as 18 of the top 20 gainers on the MSCI Emerging Markets Index were Chinese companies. The yield on China’s 10-year bond rose to the highest level since 2007. India’s rupee strengthened the most in a month while Malaysia’s ringgit rose for a third day.

The MSCI index jumped 1.2 percent to 1,017.43 at 2:33 p.m. in Hong Kong, set for its highest close since Nov. 4. Chinese leaders vowed to allow more private investment in state-owned industries, loosen the one-child policy and expand farmers’ land rights as the ruling Com party seeks to sustain growth in the world’s second-biggest economy.

“China is a key driver of Asia and the global economy, so the market is taking it positively,” Jeffrosenberg Tan, a fund manager at PT Sinarmas Asset Management, which manages about $600 million, said in Jakarta. “The measures are expected to help China’s long-term economic growth.”

The Shanghai Composite Index (SHCOMP) gained 2.4 percent, set for the highest close since Oct. 22. The Hang Seng China Enterprise Index (HSCEI) of mainland stocks listed in Hong Kong surged 5.3 percent, the biggest advance since December 2011. India’s S&P BSE Sensex (SENSEX) jumped 1.7 percent, the most in three weeks.

The emerging markets gauge has slid 3.6 percent this year and trades at 10.7 times projected 12-month earnings. That compares with the 21 percent jump in MSCI World Index, which is valued at 14.6 times estimated earnings. All 10 industry groups in the MSCI Emerging Markets Index gained, led by a 1.4 percent increase in financial stocks. India’s rupee rallied 0.8 percent to 62.635 per dollar. Malaysia’s ringgit added 0.2 percent.

IPO Reform

Chinese brokerages led the rally, with Citic Securities and Haitong Securities surging to an eight-month high. China’s government flagged policy changes that portend the end of a 14-month ban on initial public offerings by pushing forward reform for a registration system on IPOs, according to a Nov. 15 statement posted on the government’s website.

The yield on Chinese government bonds due August 2023 rose five basis points to 4.65 percent, according to prices from the National Interbank Funding Center. The yuan was little changed at 6.0919 per dollar. The currency has strengthened 2.3 percent this year. China will accelerate convertibility of the yuan and free-up of interest rates, improve treasury yield curves and let qualified private investors set up small-to-medium sized banks, the official Xinhua News Agency reported on Nov. 15.

To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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