Emerging Stocks Gain After Italy’s Berlusconi Agrees to Resign

Nov. 8 (Bloomberg) -- Emerging-market stocks rose as Italian Prime Minister Silvio Berlusconi’s decision to resign following lawmakers’ approval of the country’s austerity plans.

The MSCI Emerging Markets Index rose 0.03 percent to 990.56 as of 4:40 p.m. in New York, with 402 stocks on the index declining and 343 gaining. The index fluctuated during most of the day as Berlusconi earlier failed to win an absolute majority in a parliamentary vote on the budget. Brazil’s Bovespa declined 0.3 percent while China’s Shanghai Composite Index retreated 0.2 percent and South Korea’s Kospi Index lost 0.8 percent. Mexico’s benchmark advanced 0.9 percent and the Czech Republic’s PX gained 0.8 percent.

Italian President Giorgio Napolitano said Berlusconi will resign after the austerity vote, which was tentatively slated for next week. Earlier in the day, Berlusconi failed to win an absolute majority in the 630-seat Chamber of Deputies on a routine ballot on Italy’s 2010 budget.

Berlusconi’s resignation is “a clear positive for Europe,” Luis Saenz, London-based chief executive officer of the U.S. unit of Moscow-based brokerage Otkritie Financial Corp, said via e-mail.

The yield on 10-year Italian bonds rose 11 basis points, or 0.11 percentage point, to 6.77 percent today, a euro-era record. European stocks dropped over the past two days, as two Berlusconi allies defected to the opposition and a third quit.

Extra Yield

The MSCI emerging-market index has dropped 14 percent this year, more than the 5 percent slide in the MSCI World Index of developed-country shares. The emerging-market gauge trades at 10.5 times estimated earnings, less than the 12.2 ratio for the MSCI World, according to data compiled by Bloomberg.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined 13 basis points, or 0.13 percentage point, to 383, according to JPMorgan Chase & Co.’s EMBI Global Index.

Nineteen of 25 emerging-market currencies tracked by Bloomberg advanced. South Africa’s rand gained 1.3 percent against the dollar and Russia’s ruble added 0.7 percent. India’s rupee weakened 0.8 percent.

MMX Mineracao & Metalicos SA fell 3.8 percent after the Brazilian iron-ore producer controlled by billionaire Eike Batista posted a third-quarter net loss of 243.2 million reais ($139.7 million) and said it will delay a key port project. Usinas Siderurgicas de Minas Gerais SA dropped as much as 2.4 percent as Brazil’s second biggest steelmaker said third-quarter net income plunged 80 percent.

Chile, Mexico

In Chile, CFR Pharmaceuticals SA jumped 5.5 percent after the drug developer and distributor agreed to buy a 51 percent stake in Canada’s Uman Pharma Inc.

Wal-Mart de Mexico SAB, Latin America’s largest retailer, advanced 2.6 percent. Sales at stores open at least a year, or same-store sales, rose 6.2 percent in October from a year earlier, the company said in a statement.

Tencent Holdings Ltd., China’s biggest Internet company by sales, dropped 5.5 percent in Hong Kong after Nomura Holdings Inc. recommended investors sell the shares. Nomura added Tencent to its list of stocks for “short” positions, saying the Shenzhen-based company’s profitability is declining because of costs to invest in new businesses.

To contact the reporter on this story: Ksenia Galouchko at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net