Emerging Stocks Rise to Four-Month High After Fed Minutes

Emerging-market stocks advanced to a four-month high as Federal Reserve meeting minutes eased concern about the pace of U.S. interest-rate increases. South Korea’s won climbed to the highest level since 2008.

The MSCI Emerging Markets Index added 0.3 percent to 1,014.83, gaining for a fourth day. The Shanghai Composite Index (SHCOMP) jumped to a six-week high after a report that China will raise railway spending bolstered confidence in economic growth. India’s S&P BSE Sensex (SENSEX) rose to a record as banks surged. The won advanced the most among 31 major currencies tracked by Bloomberg on speculation authorities will allow it to appreciate.

Several Fed policy makers said an increase in their median projection for the main interest rate exaggerated the likely speed of tightening, according to minutes of their March meeting. The MSCI Emerging Markets Index has retreated as much as 16 percent since May 22, when the central bank signaled stimulus could be trimmed if the economy showed improvement.

“Fed tightening expectations were pushed out,” Win Thin, global head of emerging-market strategy at Brown Brothers Harriman & Co., said in a telephone interview from New York. “Having steady rate policy in the U.S. but firmer growth is good for emerging markets. It’s the best of both worlds.”

The iShares MSCI Emerging Markets Index ETF advanced 0.8 percent to $42.28. The premium investors demand to own emerging-market debt over U.S. Treasuries fell 0.04 percentage point to 290 basis points, according to JPMorgan Chase & Co.

‘Well Aware’

The Shanghai Composite Index rose to the highest level since Feb. 21. China increased its railway fixed-asset investment target for this year to 720 billion yuan ($116.2 billion), higher than the 700 billion yuan target it set at the beginning of the year, the People’s Daily reported, citing Sheng Guangzu, general manager of China Railway Corp.

“I don’t think they’re asleep at the switch,” Alan Gayle, who helps oversee about $50 billion in assets as a senior strategist at RidgeWorth Capital Management, said in a telephone interview from Atlanta. “China seems to be well aware of the issues and that’s a positive.”

India’s S&P BSE Sensex climbed 1.6 percent, the most in Asia today. State Bank of India advanced to a nine-month high.

The won climbed to the highest level since August 2008. Overseas investors bought more South Korean equities than they sold for an 11th day, exchange data show.

Turkish shares sank 2.1 percent while the lira retreated the most since March 19. Economy Minister Nihat Zeybekci, speaking in an interview with NTV television, said the reasons that led the central bank to raise rates in January no longer exist. Russia’s ruble fell for a third day as President Vladimir Putin held a government meeting on energy relations with Ukraine amid turmoil in the east of the country.

Brazil’s Ibovespa fell 0.9 percent as homebuilders sank after a report showing consumer prices increased more than forecast revived speculation that policy makers will keep raising borrowing costs.

To contact the reporters on this story: Alexandria Baca in New York at abaca3@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

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

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