Emerging-market stocks gained after the U.S. Federal Reserve said interest rates will remain low until late 2014, weakening the dollar and boosting demand for riskier assets.
The MSCI Emerging Markets Index rose 0.2 percent to 999.60 at the close in New York and jumped as much as 0.5 percent after the Fed decision. Mexico’s IPC Index rose 1 percent. The Micex Index gained 0.7 percent in Moscow while Hungary’s BUX Index slid the most in two weeks. The BSE India Sensitive Index climbed 0.5 percent.
The Fed extended its pledge to keep benchmark borrowing rates low and Chairman Ben S. Bernanke didn’t rule out another round of so-called quantitative easing, or bond purchases, as the Fed works to reduce unemployment. The yield on the U.S. Treasury five-year note sank to a record low of 0.797 percent and gold climbed to a six-week high.
“Emerging-market equities, the euro and gold have all been pushed up today,” Komal Sri-Kumar, chief global strategist at Los-Angeles based TCW Group Inc., wrote in an e-mail. “Bernanke set an implicit inflation target of 2 percent per year. If that means that the Fed will start a QE3, that move would, indeed have the impact of pushing up emerging market equity prices” by lowering U.S. bond yields and making emerging-market stocks more enticing.
Emerging-market stocks have gained 9 percent this year, their best January performance since 2006, after tumbling 20 percent in 2011. The developing-nation index trades for 10.1 times estimated earnings, compared with a 12.1 times multiple for the developed-country gauge.
Record earnings from Apple Inc., the maker of iPhones and iPads, also boosted markets. Hynix Semiconductor Inc., which supplies memory chips to Apple, added 1.9 percent in Seoul.
Apple said first-quarter profit surged to $13.1 billion, or $13.87 a share. Analysts surveyed by Bloomberg on average estimated profit of $10.14 a share. The shares gained 6.2 percent to a record $446.66.
LG Electronics Inc., the world’s third-largest maker of mobile phones, rose 4 percent in Seoul. Sales of the company’s Optimus LTE phone exceeded one million units, the company said in a statement.
Hungary’s BUX Index fell 1 percent as leaders worked to revive bailout talks with the International Monetary Fund and the European Union.
Mexico’s IPC stock index rose 1 percent.
Emerging-market currencies including the Mexican peso, the Hungarian forint and Turkey’s lira rebounded against the dollar after the Fed decision. The forint gained 1.4 percent versus the dollar, the best performance among 25 emerging-market currencies tracked by Bloomberg.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage points, to 405 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
Markets in Hong Kong, Taiwan and China remain closed for holidays. Brazilian equity markets were closed for a holiday.