Emerging-market stocks rose, led by India, as the rupee jumped from near a record low after the central bank eased overseas borrowing rules. Persian Gulf shares sank on concern the U.S. is close to a strike against Syria.
The MSCI Emerging Markets Index added 0.4 percent to 937.79. Indian shares surged the most in Asia and the rupee erased losses on speculation the monetary authority sold dollars. Brazil’s Ibovespa rebounded as cosmetics maker Natura Cosmeticos SA led gains in consumer companies. Dubai’s DFM General Index dropped 3.7 percent, the most among the 94 world gauges tracked by Bloomberg, while benchmark equity measures in Kuwait, Abu Dhabi and Saudi Arabia slid more than 2.1 percent.
The Reserve Bank of India, under new governor Raghuram Rajan, allowed companies to borrow from foreign shareholders, according to a statement today. The U.S. Senate Foreign Relations Committee voted to authorize President Barack Obama to conduct a limited U.S. military operation in Syria, the first step toward congressional endorsement of the effort.
“Currency risk is an additional factor with emerging markets; when central banks come back in to restore order, that risk premium will go away,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $150 billion, said by phone. “There’s been a little bit more risk aversion priced into the markets. Clearly, Syria is contributing to a little bit more investor angst.”
Investors also watched the Federal Reserve’s Beige Book for clues on how soon the central bank will begin tapering stimulus. Americans spending more on cars and housing helped the economy maintain a “modest to moderate” pace of expansion from early July through late August, even as borrowing costs increased, the Fed said today.
“This simply points the way towards confirming we’re going to have tapering,” Clement Miller, an investment strategist at Wilmington Trust Investment Advisors Inc., which manages about $20 billion in assets, said by phone from Baltimore. “To a large extent, tapering has already been built into market expectations regarding emerging markets.”
All 10 groups in the MSCI Emerging Markets Index rose today, led by health-care shares. The gauge of developing nations trimmed this year’s plunge to 11 percent, compared with a 12 percent advance for a measure of developed markets.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 1.8 percent to $38.94. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slid 5.9 percent to 26.68.
Brazil’s Ibovespa added 0.2 percent, after slumping as much as 1 percent earlier, amid speculation that policy makers will refrain from speeding up the pace of interest-rate increases. Natura climbed 3.1 percent.
The Micex Index rose for a third day, led by OAO Gazprom. Russia’s central bank Chairman Elvira Nabiullina signaled policy makers may embark on an easing cycle for the first time in almost two years. Russia failed to raise as much money as planned at a government bond auction, joining nations from India to Taiwan in missing borrowing targets as investors keep away from emerging-market assets.
The S&P BSE Sensex added 1.8 percent as Reliance Industries Ltd., which this week began marketing a $1.75 billion-equivalent loan, rose 2.2 percent after falling the most in more than four years yesterday. The rupee advanced 1 percent to 67.09 per dollar in Mumbai, prices from local banks compiled by Bloomberg show. It fell as much as 1.3 percent to 68.62 earlier.
Dubai’s benchmark stock index fell more than 10 percent from its 2013 high as the prospect of a military strike against Syria weighed on investor sentiment in the oil-rich Persian Gulf. Dubai Investments PJSC, which holds stakes in more than 40 businesses, tumbled 5.3 percent, while discount carrier Air Arabia PJSC fell for a third day.
Some of the world’s worst performing benchmarks were from the Persian Gulf today. Oman’s gauge lost 2.9 percent, Kuwait’s dropped 2.6 percent, Abu Dhabi’s fell 2.3 percent and Saudi Arabia’s Tadawul All Share Index lost 2.2 percent. Qatar’s Index retreated 1.9 percent.
The Shanghai Composite Index rose 0.2 percent, adding to yesterday’s 1.2 percent gain, as raw material producers and port operators rallied. Shanghai International Port (Group) Co. surged 10 percent, adding to a 95 percent gain since the State Council approved the city’s free-trade zone plan on Aug. 22.
The premium investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 351 basis points, according to JPMorgan Chase & Co.