Emerging Stocks Cut Monthly Drop as Korea Boosts Outlook

Oct. 31 (Bloomberg) -- Emerging-market stocks advanced for a second day, paring the biggest monthly decline since May, as commodities gained and improving data from South Korea to the U.S. bolstered the global economic outlook.

Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, jumped the most in three weeks, and LS Industrial Systems Co., a Korean maker of power transmission and distribution equipment, surged the most in 11 months after reporting earnings that beat analysts’ estimates. OAO Novatek, Russia’s second-largest natural gas producer, snapped a six-day slump as oil rose. Brazilian retailer Lojas Renner SA rallied after third-quarter net income beat estimates.

The benchmark gauge for developing-nation equities added 0.2 percent to 995.33 at the close of trading in New York, cutting its drop in October to 0.7 percent, the most since the index lost 12 percent in May. South Korean factory output rose for the first time in four months in September, boosted by stronger sales of cars and electronics. A report yesterday showed home prices rose by the most in two years in the U.S., where equity markets resumed after a two-day shutdown during Hurriance Sandy.

“Economic indicators from South Korea and the U.S. combined with higher-than-expected earnings are helping keep equities afloat,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. The biggest Atlantic storm in history, which caused at least 50 U.S. deaths, “will spur reconstruction that would encourage consumer spending and demand that may find its way into the emerging markets.”

Energy Stocks Slump

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, fell 0.1 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, gained 0.8 percent.

The Hang Seng China Enterprises Index of mainland companies trading in Hong Kong increased 1.2 percent. South Korea’s Kospi index added 0.7 percent and the won advanced for a fifth day to a 13-month high. Russia’s Micex Index gained 0.3 percent, ending a six-day slide as oil climbed 0.5 percent to $86.07 a barrel in New York. Brazil’s Bovespa fell 1.1 percent.

Gauges of health-care, consumer discretionary and material stocks led gains among the MSCI Emerging Markets Index’s 10 industry groups. Energy stocks dragged, as Petroleo Brasileiro SA’s preferred shares fell 3.4 percent in Sao Paulo on concerns that current fuel prices in Brazil are too low to support the company.

Lagging Behind

The measure of emerging market stocks has risen 8.6 percent this year, lagging behind a 10 percent increase in the MSCI World Index of developed countries. The emerging-markets index trades at 11.4 times estimated earnings, compared with the MSCI World’s multiple of 13.1, data compiled by Bloomberg show.

Taiwan’s dollar rose for a third month as official data showed economic growth rebounded in the third quarter. The South Korean won led the monthly gains among emerging-market currencies tracked by Bloomberg, while South Africa’s rand weakened the most.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 294, according to JPMorgan Chase & Co.’s EMBI Global Index.

Raising Estimates

Lojas Renner gained 3.3 percent in Sao Paulo as third-quarter profit exceeded estimates. Centrais Eletricas Brasileiras SA, South America’s largest power producer, gained 0.9 percent after saying it expects to receive “close to” 30 billion reais ($14.8 billion) in compensation after the government changed concession rules.

Novatek rose 2.7 percent. Cyprus will negotiate the sale of oil and gas licenses in its exclusive economic zone, which will be concluded in 2013, with companies including Novatek, Minister of Commerce, Industry and Tourism Neoklis Sylikiotis said, according to a statement e-mailed late yesterday.

LS Industrial Systems surged 6.9 percent, the most in almost a year. Operating income rose to 50.9 billion won ($47 million) in the three months to Sept. 30, from 16.7 billion won a year earlier, the company said today in a filing. That’s more than the 46.6 billion won average of analyst estimates compiled by Bloomberg.

Globe Trade Centre SA, Poland’s biggest property developer by market value, rose 0.9 percent after Deutsche Bank AG raised its recommendation to buy from hold and increased its share-price estimate.

Bank Earnings

ICBC climbed 2 percent, the most since Oct. 11. The company led the nation’s biggest lenders in posting a profit that beat analyst estimates. Net income at ICBC rose 15 percent to a record 62.4 billion yuan ($10 billion).

China Railway Group Ltd. surged 7.6 percent in Hong Kong after third-quarter profit jumped 65 percent to 1.88 billion yuan. China Shipping Container Lines Co. rallied 8.9 percent, the largest gainer on the emerging-markets gauge, after the company returned to profit in the third quarter.

Hon Hai Precision Industry Co., the world’s largest contract manufacturer of electronics, added 0.8 percent. Third-quarter net income climbed 58 percent to NT$30.3 billion ($1 billion), according to Bloomberg calculations based on nine-month results. The average of 13 analysts’ estimates compiled by Bloomberg was for a profit of NT$23.4 billion.

PetroChina Co., the world’s biggest publicly traded oil producer, slid 2 percent. The company posted its lowest third-quarter profit in at least five years because of refining losses and natural-gas import costs.

To contact the reporters on this story: Ian Sayson in Manila at isayson@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

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