Emerging-market stocks climbed, with volatility in the benchmark index falling to a seven-year low, as the Federal Reserve said it will buy more bonds as part of measures to boost the world’s largest economy.
GCL-Poly Energy Holdings Ltd. led gains on the MSCI Emerging Markets Index after China announced a second round of solar subsidies. Celltrion Inc., a biopharmaceutical company, gained the most in eight weeks in Seoul after saying it plans to pay stock dividends. E.ON Russia drove an advance in Moscow’s Micex Index on a report the power producer may pay its 2012 net income as dividends. Brazilian online retailer B2W Cia. Global do Varejo surged to a 17-month high in Sao Paulo.
The emerging-markets stock gauge rose for a sixth day, its longest winning streak in three months, adding 0.7 percent to an eight-month high of 1,041.37. Ten-day volatility for the gauge slid to 5.02, to the lowest level since September 2005. The Fed said today it will buy $45 billion of Treasury bonds starting in January, extending its asset-purchase program aimed at bolstering growth. Interest rates will stay low “at least as long” as the unemployment rate remains above 6.5 percent, the Federal Open Market Committee said in a statement.
“I’m very positive because what we have witnessed in the last few years is an incredible build-up of money emanating from various central banks around the world,” Templeton Emerging Markets Group’s Mark Mobius, who oversees more than $40 billion, said in a phone interview from Nairobi today. “At the end of the day, it’s all about how much money is available in the system.”
The 21 countries in the emerging-markets index send about 17 percent of their exports to the U.S., according to data compiled by the World Trade Organization. Should U.S. politicians resolve the nation’s “underlying fiscal issues” and growth in the world’s biggest economy recover “toward the 3 percent level, then emerging equities would be among the main beneficiaries,” John-Paul Smith, an emerging markets strategist at Deutsche Bank AG in London, said in an e-mailed report on Dec. 10.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed six basis points, or 0.06 percentage point, to 270 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
“This Fed announcement today adds further momentum for emerging markets,” Ed Kuczma, an emerging markets analyst at Van Eck Associates Corp. in New York, which manages $37 billion, said by phone after the Fed’s announcement. “When you have easy liquidity within the markets, it allows investors to take on a little more risk.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, rallied 0.3 percent to $43.38, also the highest level since April. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, was little changed at 21.14.
Benchmark equity indexes in Turkey, Poland and the Czech Republic climbed. Russia’s Micex jumped 1.2 percent for the longest winning streak since July 2011 as EON added 4 percent. The Interfax newswire cited Ulf Backmeyer, deputy general director of finance, economics in Russia at EON, as saying the company may pay their “entire” 2012 net income out as dividends.
Brazil’s Bovespa Index fell 0.3 percent, the first decline this week, as homebuilder MRV Engenharia & Participacoes SA dropped 2.6 percent on concern weaker economic growth in Brazil will hurt profits. B2W, Brazil’s biggest online retailer, jumped 7.1 percent to the highest level since June last year amid speculation holiday sales will fuel a recovery in the company’s earnings. Indexes in Argentina, Chile and Colombia rose, while markets in Mexico were closed for a holiday.
Hong Kong-based GCL, a maker of solar-panel wafers, surged 11 percent for the biggest one-day jump since Jan. 12. China, the world’s biggest maker of solar modules, chose about 100 developers to receive subsidies this year, the Science and Technology Ministry said in a statement on its website.
Chinese solar stocks listed in the U.S. also surged on the news, with panel maker Yingli Green Energy Holding Co. soaring 18 percent to the highest level since July 23.
South Korea’s Celltrion climbed 7.3 percent to the highest level since Sept. 25 after saying it will pay a stock dividend of 0.148 share for every share investors own.
The Hang Seng China Enterprises Index of mainland Chinese companies listed in Hong Kong rallied 1.5 percent, closing at the highest level since March 16. The won rose to the strongest level since Sept. 2011. Thailand’s SET Index added 1 percent for the highest close since February 1996.
The MSCI’s emerging-markets gauge has risen 14 percent this year, beating the 13 percent gain in the MSCI World Index of developed-country companies. The developing-nations measure trades at 12 times estimated earnings, compared with the MSCI World’s multiple of 13.7, data compiled by Bloomberg show.
All 10 industry groups in the MSCI Emerging Markets Index rose today, led by the 0.9 percent advance in health care companies. ArcelorMittal South Africa Ltd., Africa’s biggest steelmaker, drove gains in materials stocks, jumping 7.9 percent in Johannesburg as Australia lifted the price forecast for iron ore on Chinese demand.
Romania’s leu strengthened 0.4 percent versus the euro, leading gains among emerging-market currencies tracked by Bloomberg. Prime Minister Victor Ponta, whose Social Liberal Union, or USL, won 67 percent of the 588 seats in parliament, said yesterday that he will seek to bolster the party’s two-thirds majority with the aid of minority parties.
E-Star Alternative Nyrt., a Hungarian energy supplier, sank 25 percent to a record low as the Budapest Stock Exchange doubled the maximum trading range for the shares after the company filed for bankruptcy.
Dana Gas PJSC jumped 9.3 percent, the most since December 2009, on bets the United Arab Emirates fuel producer’s $920 million Islamic bond restructuring will spur profit growth.
Sri Lanka’s Colombo All-Share Index rose 1.8 percent, the most since September 14, after the central bank unexpectedly lowered its policy interest rates for the first time since 2011 to spur economic growth.
LG Display Co. dropped 4.9 percent, the biggest one-day loss since June 4, on speculation Apple Inc. may introduce an upgraded iPhone 5 version earlier than expected, potentially cutting the South Korean company’s shipments for the existing model.
PT Unilever Indonesia, a unit of the world’s second-biggest consumer goods company, led declines on the emerging markets benchmark after sinking 11 percent in Jakarta, the largest drop since June 2005. The company said in a statement today that total royalties to Unilever NV would increase to 5 percent of its revenue beginning next year. That compares with 3.5 percent now.