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Emerging Stocks Cap 15% 2012 Gain as Chinese Output Grows

Most emerging-market stocks rose, pushing the benchmark index to a 15 percent advance in 2012, as Chinese manufacturing expanded and U.S. lawmakers negotiated to avert automatic tax increases and spending cuts.

Zhuzhou CSR Times Electric Co., which supplies electrical systems for China’s railways, gained for a fourth day. China Life Insurance Co. jumped the most in three weeks as the nation’s securities watchdog said insurers would be allowed to set up mutual funds. Lenovo Group Ltd., the world’s biggest maker of personal computers, fell to a five-week low after the chief executive officer cut his stake. China’s Shanghai Composite Index climbed to a six-month high.

The MSCI Emerging Markets Index was little changed at 1,055.20 in New York, as 189 stocks rose while 163 fell. Chinese factory output grew at the fastest pace in 19 months, HSBC Holdings Plc and Markit Economics said today. While, the U.S. House of Representatives doesn’t plan any votes on the budget tonight, Senate Minority Leader Mitch McConnell said lawmakers are “very, very close” to a deal to avert the $600 billion in tax increases and spending cuts set to start at midnight.

“We’re getting farther away from this fear of a hard landing in China and getting closer to some kind of meaningful recovery in the rate of growth of the world’s second-largest economy,” Michael Gayed, the chief investment strategist at Pension Partners LLC, said by phone in New York.

Chinese Rebound

Equity markets in Russia, Hungary, Poland, the Czech Republic, South Korea, Taiwan, Indonesia, Thailand and the Philippines were closed for holidays. Markets in Brazil, Chile and Argentina were also closed.

The 21 nations in the developing-nations gauge send about 17 percent of their exports to the U.S. on average, World Trade Organization data show. Allowing the tax increases and spending cuts to take effect would cause a recession in the first half of 2013, according to the U.S. Congressional Budget Office.

“Most traders have their eyes on the U.S. fiscal cliff and how it unfolds,” said Alex Mathews, the head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, South India.

The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, added 1.5 percent to $44.35, and rallied 17 percent this year. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 5.8 percent to 21.70.

Zloty Rallies

The Shanghai Composite of domestic Chinese shares climbed 1.6 percent to its highest level since June 20. The gauge jumped 15 percent this month, the most since July 2009. The BSE India Sensitive Index, or Sensex, slipped less than 0.1 percent for a 26 percent gain in 2012. The FTSE Bursa Malaysia KLCI Index gained 0.5 percent to a record, led by a 9.4 percent surge in Kuala Lumpur Kepong Bhd.

India’s Sensex had the biggest gain this year among the so-called BRIC nations, while the Shanghai Composite was the worst performer with a 3.2 percent increase. Brazil’s Bovespa Index rose 7.4 percent and Russia’s Micex Index added 5.4 percent.

Mexico’s IPC Index was little changed, falling less than 0.1 percent. Fomento Economico Mexicano SAB, owner of Latin America’s largest convenience store chain, fell 1 percent, leading decliners on the gauge. Bolsa Mexicana de Valores SA, operator of the nation’s stock exchange jumped 3.4 percent, the steepest one-day rally in almost a month.

South Korea’s won advanced 0.6 percent against the dollar in offshore trading today after inflation slowed, extending this year’s advance to 8.3 percent. Poland’s zloty led gains among major emerging market currencies in 2012, climbing 9.4 percent versus the euro and 11 percent against the dollar. Argentine’s peso has dropped 13 percent this year, the worst performance among developing-nation currencies.

Utilities Drop

PT Bumi Resources, which slumped 73 percent in Jakarta in 2012, was the worst performer on the MSCI Emerging Markets Index for the year. Its parent, Bumi Plc, is at the center of a dispute between its founders Nathaniel Rothschild and Indonesia’s Bakrie Group.

United Spirits Ltd., India’s largest distiller, had the biggest gain on the MSCI gauge this year after climbing 286 percent. Diageo Plc said in November it will buy a controlling stake in United Spirits for $2.04 billion.

Health-care companies rose the most among the 10 industry groups in the MSCI index of developing nations, rallying 32 percent this year, while utilities were the worst performers with a 2.4 percent advance. Brazilian power companies led utility declines as lawmakers intervened to cut tariffs, with Centrais Eletricas Brasileiras SA, the state-controlled power generator, sinking 65 percent in 2012.

Chinese PMI

Zhuzhou CSR, based in Hunan, China, jumped 4.7 percent in Hong Kong today. The final reading of a Purchasing Managers’ Index for China was 51.5 in December, according to data released today by HSBC and Markit Economics. That compares with a 50.9 preliminary reading issued Dec. 14 and a final 50.5 in November. A reading above 50 indicates expansion.

China Life Insurance rose 3.1 percent in Hong Kong, its third day of gains. New China Life Insurance Co. added 2.6 percent and Ping An Insurance (Group) Co. gained 1.9 percent.

The China Securities Regulatory Commission posted draft rules on its website yesterday allowing insurers’ asset management units and securities brokerages to set up mutual funds, a move the regulator said seeks to “attract various funds into the capital market.”

Emaar Slides

Lenovo sank 2.2 percent in Hong Kong, its second day of losses after Chief Executive Officer Yang Yuanqing sold 29 million shares of the company.

Emaar Properties PJSC, developer of the world’s tallest skyscraper, dropped 1.6 percent, the most in two weeks. The United Arab Emirates, where foreigners make up more than 80 percent of the population, issued guidelines to restrict mortgages for expatriates to 50 percent of property value, according to guidelines issued by the central bank yesterday and obtained by Bloomberg News.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries narrowed 7 basis points, or 0.07 percentage point, to 264 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

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