Emerging Stocks Advance as Yellen Says Fed Stimulus Still Needed

Emerging-market stocks headed for a 16-month high as a weaker won boosted South Korean exporters and Federal Reserve Chair Janet Yellen said the U.S. central bank must press on with monetary stimulus.

The MSCI Emerging Markets Index rose 0.3 percent to 1,066.88, the highest closing level since February 2013. Equities in Dubai gained 3.4 percent, pushing the benchmark index back into a bull market three weeks after its bear rout. Samsung Electronics Co. (005930) gained 2.6 percent in Seoul, while the won fell 0.9 percent. Steelmaker Cia. Siderurgica Nacional SA paced gains among Brazilian commodity producers.

The won has slumped 1.5 percent in July, boosting earnings prospects for companies such as Samsung, which gets most of its revenue from outside Korea. Yellen said “a high degree of monetary policy accommodation remains appropriate,” in semi-annual testimony prepared for delivery to the Senate Banking Committee today.

“This was a ‘steady as she goes’ speech,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $366 billion, said in a telephone interview. “Changes in rates are likely what happens next, but there doesn’t seem to be any information of that here. It’s positive for equities.”

Yellen cited labor-market weaknesses even after an unexpectedly fast decline in unemployment put pressure on Fed officials to consider accelerating their timetable for an interest-rate increase. Rates are likely to stay low for a “considerable period” after bond purchases end, which could happen following the Fed’s October meeting, she said.

Stock Valuations

The developing-market gauge has gained 6.4 percent this year and is valued at 11.1 times projected 12-month earnings. The MSCI World Index has advanced 4.8 percent and trades at a multiple of 15.1, according to data compiled by Bloomberg.

Eight out of 10 industry gauges in the emerging-market index rose, led by telecommunications stocks. ZTE Corp. (763) jumped 8.4 percent in Hong Kong, the most in a year. The company revised its first-half profit forecast to 1 billion yuan ($161 million) to 1.5 billion yuan, from 800 million to 1 billion yuan. South Korea’s Kospi index increased 0.9 percent, led by Samsung, the world’s biggest smartphone maker.

Dubai’s DFM General Index (DFMGI), the best-performing stock market globally this year in dollar terms, climbed to the highest level since June 12. Arabtec Holding Co. (ARTC), builder of the world’s tallest tower in the emirate, soared 14 percent.

Brazil, India

CSN, as Cia. Siderurgica is known, jumped 3.9 percent in Sao Paulo. The benchmark Ibovespa advanced 0.4 percent.

Stock markets in Egypt, Qatar and Turkey added at least 0.8 percent. The Shanghai Composite Index (SHCOMP) rose 0.2 percent after data showed new bank lending exceeded estimates. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong increased 0.3 percent.

India’s S&P BSE Sensex (SENSEX) gained 0.9 percent, ending a five-day decline, after data showed yesterday that consumer prices increased in June by the least since January 2012. The Jakarta Composite Index climbed 1 percent.

The premium investors demand to own emerging-market debt over U.S. Treasuries slipped one basis point to 262 basis points, according to JPMorgan Chase & Co. indexes.

The Indonesian rupiah retreated for a third day after both candidates in last week’s presidential election said they won the vote, and amid signs the country’s current-account deficit widened to near a record.

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

To contact the editors responsible for this story: Daliah Merzaban at dmerzaban@bloomberg.net Richard Richtmyer

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