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Emerging Stocks Extend Quarterly Rise on Manufacturing

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April 2 (Bloomberg) -- Emerging-market stocks rose, extending their first-quarter gain, after gauges of U.S. and Chinese manufacturing advanced, showing expansion in the world’s largest economies.

The MSCI Emerging Markets Index added 0.6 percent to 1,047.72 at the close in New York, led by consumer discretionary companies. Apparel retailer Cia. Hering rose the most in a week in Brazil, helping the Bovespa index end a four-day retreat. China Railway Construction Corp. rallied 8.3 percent in Hong Kong after better-than-expected profits. Industrias Penoles SAB, Mexico’s largest silver producer, pushed the country’s IPC index to a record high.

A Purchasing Managers’ Index compiled by China’s logistics federation and the National Bureau of Statistics rose to 53.1 in March from 51 in February. The Institute for Supply Management’s factory index climbed to a 53.4 last month in the U.S., exceeding the median forecast in a Bloomberg survey. Readings above 50 signal expansion.

“If you have strength in a massive developed economy, then emerging markets follow that,” Michael Gayed, chief investment strategist at Pension Partners LLC, said by phone from New York. “The market probably is overestimating the probability that you will have that hard landing, that you will have some kind of collapse in China’s economy.”

The MSCI Emerging Markets Index rose 14 percent in the first quarter, the best start to a year since 1992. It outperformed the MSCI World index of developed-market shares for the first time since the third quarter of 2010. The developing-nation benchmark trades for 10.8 times estimated earnings, compared with a 13.2 ratio for developed-country stocks.

Volatility

The IShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF that tracks developing-nation shares, rose 1.4 percent to $43.55. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, fell for the third day, declining 3.3 percent.

Brazil’s Bovespa gained 1.1 percent, ending a four-day slump. Hering rose 1.1 percent while retailer Lojas Americanas SA increased 2 percent.

China’s government-backed PMI is skewed toward large enterprises and affected by seasonality, with the gauge climbing an average of 3.2 points each March from 2005 to 2011 as production returned to normal after a Lunar New Year holiday, HSBC Holdings Plc said in a note.

A separate PMI from HSBC and Markit Economics fell to a four-month low of 48.3, showing that manufacturing contracted and export orders declined.

A euro region manufacturing gauge, based on a survey of purchasing managers, fell to 47.7 in March from 49 in February, Markit Economics said, marking an eighth month of contraction.

Turkey Growth

Turkey’s ISE National 100 Index added 0.9 percent after Turkish economic growth in the fourth quarter came in at 5.2 percent, exceeding economists’ estimates. Turkiye Garanti Bankasi AS rose 3.1 percent in Istanbul.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 0.2 percent.

In South Korea, the Kospi Index advanced 0.8 percent after the country’s credit rating outlook was raised by Moody’s Investors Service to positive from stable.

The BSE India Sensitive Index, or Sensex, rose 0.4 percent, advancing for a second day. Stock markets in China, Vietnam and Argentina were closed today for holidays.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined one basis point, or 0.01 percentage point, to 341, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net.

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net.

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