Emerging-market stocks climbed the most in a week as Greece’s decision to scrap a referendum on a bailout and a surprise interest-rate cut by the European Central Bank eased concern that the debt crisis will spread.
The MSCI Emerging Markets Index rose 1.6 percent to 989.63 at 4:31 p.m. in New York, trimming this week’s drop to 2 percent. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rallied 4 percent, followed by a 3.1 percent gain for South Korea’s Kospi Index. Brazil’s Bovespa rose 0.8 percent on prospects for deeper Brazilian interest-rate cuts. Mexico’s benchmark rose 0.3 percent and the Czech PX Index fell 0.6 percent.
Emerging-market stock funds had the largest weekly inflows since early April, attracting $3.5 billion in the period ended Nov. 2, Citigroup Inc. analyst Markus Rosgen wrote in a report today, citing figures compiled by EPFR Global. World leaders failed to agree on a new International Monetary Fund commitment today as they await more details of a week-old rescue package. Greek Prime Minister George Papandreou yanked the referendum before a confidence vote in parliament tonight. The ECB cut its benchmark interest rate by 25 basis points, or 0.25 percentage point, to 1.25 percent yesterday.
“The ECB was a major boost to the global risk appetite, that was a major development in terms of signaling for emerging markets’ central banks,” Benoit Anne, London-based head of global emerging markets strategy at Societe Generale SA, said in a phone interview. “There are lots of risks ahead to clear before the rally we’re seeing can turn into a major market trend.”
MSCI’s developing-nation index has dropped 14 percent this year, more than the 6 percent decline in the MSCI World Index of developed countries. The emerging-market gauge trades at 10.4 times estimated earnings, less than the 12 times for the MSCI World, according to data compiled by Bloomberg.
Papandreou pulled his planned referendum on the bailout after it split his party, roiled financial markets and drew unprecedented warnings from euro leaders that it may cost Greece its membership in the 17-nation currency club. The ECB, under pressure to reverse this year’s two borrowing-cost increases with the region’s deepening economic slump, unexpectedly cut its benchmark rate yesterday, confounding 51 of 55 economists in a Bloomberg News survey.
The Bovespa reversed an earlier loss and gained amid speculations that the central bank may prolong its cycle of interest-rate cuts on signs of slowing growth in Latin America’s largest economy. Banco Santander Brasil SA, the Brazilian unit of Spain’s biggest bank, rose 0.1 percent after falling as much as 3 percent earlier today. Embraer SA, the world’s fourth-largest plane builder, advanced 4.4 percent after plunging yesterday amid an investigation by the U.S. Securities and Exchange Commission. Vale Sa, the world’s largest iron-ore producer, rose 1.3 percent.
Sixteen out of twenty five emerging-market currencies tracked by Bloomberg fell today. The zloty sank 1 percent against the dollar while the forint declined 1.1 percent and the Mexican peso 1.2 percent. The South Korean won rose 1.7 percent.
Information technology, financial companies and consumer stocks led gains in the emerging-stocks index. LG Display Co., the world’s second-largest liquid-crystal-display maker, jumped 8.1 percent in Seoul after Hyundai Securities Co. said the company will “significantly” cut its operating loss this quarter. Formosa Petrochemical Corp., Taiwan’s only publicly traded oil refiner, rose 2.9 percent after it said October sales gained 36 percent.
KP Chemical Corp. rallied 8.9 percent, leading South Korean petrochemical stocks higher on speculation concerns over global demand will ease, said Ahn Sang Hee, an analyst with Daishin Securities Co.
China Petroleum and Chemical Corp. and PetroChina Co., the country’s biggest fuel producers, increased 8.3 percent and 3.9 percent, respectively, in Hong Kong. China, which controls fuel prices to curb inflation, may permit refiners to make “appropriate” changes, China Securities Journal reported, citing an unidentified person.
China’s Shanghai Composite Index climbed 0.8 percent for a second week of gains. Chinese stocks have advanced this week on speculation the government will cut banks’ibov reserve requirement ratios or introduce more fiscal measures to bolster growth as inflation eases.
The BSE India Sensitive Index, or Sensex, rose 0.5 percent. Infrastructure stocks gained after the nation eased rules for foreign institutional investment in bonds issued by those companies. Larsen & Toubro Ltd., the nation’s biggest builder of airports and power networks, advanced 0.9 percent. Russian markets were closed for a holiday today.