Emerging Stocks Rise on China as Sensex Climbs to Record

Emerging-market stocks rose for a second day after an unexpected slowdown in Chinese manufacturing bolstered speculation the government will take steps to support economic growth. India’s S&P BSE Sensex (SENSEX) surged to a record.

The MSCI Emerging Markets Index added 1 percent to 953.90. The Shanghai Composite Index (SHCOMP) capped the biggest two-day gain since November and China’s benchmark money-market rate advanced for an eighth day as a central bank official said the nation will make “substantial progress” in freeing up interest rates. The Sensex climbed as the government beat its asset-sale target for the current fiscal year. Russian stocks retreated as world leaders gathered to discuss the conflict in Ukraine.

The Chinese manufacturing industry weakened for a fifth consecutive month, according to a preliminary measure for March released today, deepening concern the nation will miss its 7.5 percent growth target for this year. The gauge’s decline fueled bets that a weaker economy will prompt policy makers to reconsider their aversion to broad stimulus measures.

“There’s speculation of them trying to add stimulus to the economy,” Walter Todd, who oversees about $990 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said by phone. “That could be impacting the short-term trade in those markets.”

The Shanghai Composite Index extended a two-day rally to 3.7 percent. Bank of Beijing Co. and Haitong Securities Co. jumped at least 1.9 percent to lead an advance for financial shares. China’s benchmark money-market rate rose posted the longest rally since July. The yuan climbed the most in more than two years as the central bank strengthened the reference rate for the first time in five days.

Sensex Rallies

India’s S&P BSE Sensex rose 1.4 percent as Axis Bank Ltd. (AXSB) increased to its highest level in two weeks after the government sold a part of its holding in the lender. The Sensex is the best performer this year among the four largest emerging markets including China, Russia and Brazil as improving public finances and cooling inflation boost investor confidence.

Russian stocks erased earlier gains, led by OAO Lukoil. The world’s leading industrial powers threatened further sanctions to deter the Kremlin from invading other parts of Ukraine and boycotted what was to be a Group of Eight summit hosted by President Vladimir Putin.

Brazil’s Ibovespa rose for a sixth day, the longest rally since October. Banco Bradesco SA jumped after Credit Suisse Group AG raised its recommendation for the shares.

The iShares MSCI Emerging Markets Index exchange-traded fund advanced 1 percent to $39.36. The premium investors demand to own emerging-market debt over U.S. Treasuries slipped 0.01 percentage point to 314 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Natasha Doff in London at ndoff@bloomberg.net; Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editors responsible for this story: Tal Barak Harif at tbarak@bloomberg.net Rita Nazareth, Daliah Merzaban

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