Emerging-Market ETF Advances as Real Rallies on Moody’s

The iShares MSCI Emerging Markets Index exchange-traded fund rose for the first time in four days as Turkey’s stocks rallied. Brazil’s real climbed to a one-week high as concern the nation’s credit rating will be cut eased.

The developing-nation ETF added 0.4 percent to $39.91 at 4 p.m. in New York. The MSCI Emerging Markets Index declined 0.1 percent to 971.48. The Borsa Istanbul National 100 Index extended a two-day advance to 4 percent as banks surged. The real rallied after Moody’s Investors Service said Brazil’s economic growth would have to be much lower than 2 percent before its credit rating outlook is lowered again. Indonesia’s rupiah retreated to the lowest level since 2008.

The benchmark gauge for developing-nation stocks traded at 10.2 times projected earnings, compared with the valuation of 14.7 for the MSCI World Index, according to data compiled by Bloomberg. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index retreated 5.1 percent to 23.01.

“Valuation is quite attractive,” Benoit Anne, the head of emerging-markets strategy at Societe Generale SA in London, said by e-mail. There is a “return of EM investor interest.”

Brazil’s Ibovespa dropped for a second straight day as iron-ore producer Vale SA (VALE5) led declines in exporters amid concern that new banking regulations will curb economic growth in China, the nation’s top trading partner. Moody’s analyst Mauro Leos said yesterday that a change in Brazil’s outlook to negative is more likely this year than a cut in its credit grade if growth is “much weaker” than expected.

Christmas Holiday

The Borsa Istanbul gained as Turkiye Garanti Bankasi AS drove a rally in lenders after Fitch Ratings Ltd. affirmed its rating on Turkey’s debt. The Russian stock market is closed today for the orthodox Christmas holiday. Poland’s WIG30 Index slumped 2.4 percent, while Hungarian shares advanced.

China’s stocks rose from a five-month low as companies linked to Shanghai’s free-trade zone rallied after the government eased rules on foreign investment. Shanghai International Port (Group) Co. and Shanghai Waigaoqiao Free Trade Zone Development Co. (900912) jumped the most in a month after the cabinet said it had temporarily suspended laws to allow international shipping joint ventures in the zone.

Indian (SENSEX) stocks fell for a fifth day of amid speculation prices have exceeded the outlook for earnings. Infosys Ltd. (INFO), India’s second-largest software services provider, slid to a three-week low. Tata Steel Ltd. (TATA) and Steel Authority of India Ltd., the nation’s biggest producers, each tumbled more than 3 percent on forecasts they will report the smallest profit margins in more than a decade.

Rupiah, Won

The rupiah slid 0.5 percent to 12,238 per dollar as of 3:55 p.m. in Jakarta, prices from local banks show. It reached 12,285 earlier, the weakest level since December 2008. The won fell to an eight-week low on concern South Korea’s exports will slow as a weakening yen erodes the competitiveness of the nation’s overseas shipments.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose three basis points, or 0.03 percentage point, to 313 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Maria Levitov in London at mlevitov@bloomberg.net; Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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

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