Emerging Stocks Post Longest Rally in Six Months

Emerging-market stocks rose, driving the benchmark index to its longest winning streak in six months, on optimism policy makers around the world will step up efforts to prevent the global economy from falling into a recession.

The MSCI Emerging Markets Index advanced 0.5 percent to 927.68 at 2:29 p.m. in Hong Kong, extending a six-day, 11 percent advance. The rally is the longest since April 6. South Korea’s Kospi Index climbed 0.8 percent. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 2 percent, taking a rebound from its Oct. 4 low to 19 percent.

China unveiled a package of measures to help small companies, including tax breaks and easier access to bank loans. The Federal Reserve said some officials last month wanted to keep further asset purchases as an option to boost the economy. Slovakia is set to approve Europe’s enhanced bailout fund, while European Commission President Jose Barroso yesterday called for a reinforcement of crisis-hit banks, the payout of a loan to Greece and a faster start for a rescue fund.

“We’ve had a lot of significant action from central banks,” Mohammed Apabhai, head of Asia trading strategy at Citigroup Global Markets Asia, said in Hong Kong. “Asian central bankers have moved from a policy of tightening to a policy of loosening almost within the space of a couple weeks.”

Consumer, industrial and financial stocks rose most among the 10 industry groups in the emerging-markets gauge. Pyeong Hwa Automotive Co. climbed 3.2 percent, leading gains by South Korean makers of automobile parts, on speculation they will benefit from a free-trade agreement with the U.S.

Korea Zinc Co., which produces gold and silver, climbed 2.7 percent in Seoul after metal prices rallied yesterday. Poongsan Corp., a copper-products maker, advanced 1.3 percent.

China Support

MSCI’s developing-nation index has dropped 19 percent this year, more than the 8 percent decline in the MSCI World Index of developed countries. The emerging-market gauge trades at 9.8 times estimated earnings, less than 11.6 times for the MSCI World, according to data compiled by Bloomberg.

China’s Shanghai Composite Index gained 0.7 percent. The government will provide financial support and preferential tax policies for small companies, the State Council said in a statement yesterday, after a meeting at which Premier Wen Jiabao presided. The government will be more tolerant of bad loan ratios for small-company loans, the Cabinet said.

China announced measures to help small companies after the collapse of manufacturers in Wenzhou city highlighted growing risks to the economy. A report today showed the nation’s trade surplus last month fell to the lowest since May as export growth slowed.

“The government’s package of measures may support a rebound,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “The recent wave of government moves suggests the worst part of the tightening has passed.”

(Corrects job title in fourth paragraph of story first published on Oct. 13.)
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