Emerging Stocks Rise on German Confidence, China Policy Outlook

Emerging-market stocks rose after German business confidence unexpectedly improved and speculation mounted that China will ease lending restrictions.

The MSCI Emerging Markets Index advanced 0.3 percent to 888.24 today. Indian and South African indexes rose while benchmarks in Turkey and Russia declined. Brazil’s Bovespa snapped a five-day losing streak and climbed 0.8 percent, led by retailers. U.S. markets were closed for a holiday.

German Chancellor Angela Merkel said she remains opposed to common euro-area debt sales. They would “take us back to where we were before the crisis,” Merkel said at a press conference with Italian Prime Minister Mario Monti and French President Nicolas Sarkozy in Strasbourg, France. German business confidence rose for the first time in five months in November, and China’s central bank cut reserve ratios for more than 20 rural credit cooperatives by half a percentage point.

“Partly what we’re seeing today is that investors have already discounted a significant part of the risk as it’s known already,” Mark Konyn, who helps manage about $16 billion as chief executive officer of RCM Asia Pacific Ltd., said in a Bloomberg Television interview. “And then we’re seeing some possibility of liberalization in China, a slight easing selectively of the reserve requirement rules.”

Rate Outlook

The MSCI Emerging Markets Index has plunged 23 percent this year and the MSCI World Index of developed nations has sunk 14 percent as Europe’s debt crisis spread and concern mounted that growth in the U.S. and China is slowing. The developing nations gauge trades for 9.8 times estimated profit, compared with the MSCI World’s 11.2 times, according to data compiled by Bloomberg.

Brazil’s Bovespa rose 0.6 percent after President Dilma Rousseff signaled the country will use interest-rate cuts to help shore up economic growth amid the global slowdown. Cia. Brasileira de Distribuicao Grupo Pao de Acucar gained 5.6 percent, the most since Jun. 28. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker, tumbled 3.5 percent as metals prices declined.

The Munich-based Ifo institute’s German business climate index, based on a survey of 7,000 executives, increased to 106.6 from 106.4 in October. Economists expected a decline to 105.2, according to the median of 40 forecasts in a Bloomberg News survey.

“Germany is actually in a strong position and the order books are still full,” Carsten Brzeski, a Brussels-based economist with ING Groep NV, said before the release. “As long as the labor market and domestic spending hold up, we’re only looking at a soft patch, not a full-blown recession.”

Russian Growth

Russia’s Micex index dropped 0.8 percent. Uralsib Capital cut its economic growth forecast for Russia to 2.8 percent in 2012 from 4 percent earlier, citing a slowdown in the global economy that will lead to lower prices for oil.

South Africa’s All Share Index gained 0.8 percent. Sasol Ltd., the biggest producer of gasoline from coal, advanced 1.8 percent.

Turkey’s ISE National 100 Index fell 2.9 percent, a sixth day of losses. Soktas Tekstil & Ticaret AS, a company with interests in textiles, food and agriculture, climbed 4.1 percent after saying it hired Turkiye Sinai Kalkinma Bankasi AS to advise on an initial public offering of its farm unit, Efeler Ciftligi Tarim & Hayvancilik AS.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 443, according to JPMorgan Chase & Co.’s EMBI Global Index.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps declined 1 basis point, or 0.01 percentage point, to 377, according to data provider CMA.

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