Emerging-market stocks rose to a three-month high while bonds and currencies gained on bets Lawrence Summers’ withdrawal as a candidate to lead the Federal Reserve eases the risk of an early halt to monetary stimulus.
The MSCI Emerging Markets Index jumped 1.5 percent to 1,001.76, the highest level since June 4. The Borsa Istanbul National 100 Index led gains among 94 world equity gauges tracked by Bloomberg, while stock measures in Indonesia and Russia advanced more than 2 percent. The Russian ruble climbed for a ninth day against Bank Rossii’s target basket of dollars and euros. Foreign investors added to Korean equity holdings for a 17th day and inflows to Taiwan reached a two-month high.
Investors from Bank Julius Baer & Co. to Pictet Asset Management say emerging-market assets will extend gains after Summers pulled out of contention to be the next Fed chairman. The former Treasury Secretary would have reined in Fed stimulus faster than Janet Yellen, his main rival to replace Ben S. Bernanke, according to a Bloomberg Global Poll last week. The Fed’s bond-buying program may be reduced this week, according to the median estimate of economists surveyed Sept. 6.
“Mr. Summers was viewed as someone that might begin tightening, or tightening more aggressively,” Peter Jankovskis, who helps oversee $3.5 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said in telephone interview. “From that standpoint, in the short run the market is pleased.”
Net outflows from emerging-market equity funds peaked at $20.26 billion in June after Bernanke told Congress on May 22 the central bank could scale back the pace of its mortgage bond and Treasuries purchases if the U.S. economy showed sustained improvement, according to data of EPFR Global. Some $2.44 billion left developing-nation equities in July and another $9.15 billion in August, the data show.
All 10 groups in the MSCI Emerging Markets Index rose today as consumer discretionary and financial shares had the biggest gains. The measure for developing markets trimmed this year’s decline to 5.1 percent, trading at 10.6 times projected earnings, according to data compiled by Bloomberg. That trails the 14 valuation of the MSCI World Index.
The iShares MSCI Emerging Markets Index exchange-traded fund, the developing-nation ETF, rose 1.1 percent to $41.62. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, climbed 0.3 percent to 24.35.
Most Brazilian stocks fell as a stronger real dimmed the outlook for exports, pushing commodities producers including steelmaker Gerdau SA lower.
The Micex Index rallied 2.1 percent in Moscow as OAO Uralkali, the world’s biggest potash producer, surged on bets a conflict with Belarus will be resolved. The ruble climbed to the strongest level in almost two months, buoyed by monthly tax payments and rising appetite for emerging-market assets.
The Borsa Istanbul National 100 Index surged 3.7 percent as Turkiye Garanti Bankasi AS and Akbank TAS rallied, while the lira advanced 1.5 percent. Benchmark equity gauges in the Czech Republic and Hungary added at least 1.1 percent, while stocks in Poland retreated.
China’s stocks fell a second day as technical indicators signaled shares were overbought. Smaller-company shares gained. Jiangxi Copper Co. and Anhui Conch Cement Co. led losses for material companies with drops of at least 1.4 percent. The 14-day relative strength index, measuring how rapidly prices have risen or dropped during a specified time period, was at 72.4. Readings above 70 show a price may be poised to fall.
Most Indian stocks dropped after inflation unexpectedly quickened to a six-month high, stoking concern the central bank may maintain liquidity-tightening measures at its policy meeting this week. State Bank of India, the nation’s biggest lender, erased an intraday gain of 2.6 percent. The rupee climbed 1 percent, the strongest level since Aug. 16.
The Jakarta Composite Index rallied to a one-month high, while benchmark measures in Thailand and the Philippines added more than 2.7 percent.
The premium investors demand to own emerging-market debt over U.S. Treasuries slid eight basis points, or 0.08 percentage point, to 332 basis points, according to JPMorgan Chase & Co.