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Emerging Stocks Advance on Chinese Pledge as Real Rallies

Nov. 18 (Bloomberg) -- Emerging-market stocks climbed the most in two months as China’s pledge to carry out economic reforms bolstered speculation of more sustainable growth. Brazil’s real capped the biggest advance in eight weeks.

The MSCI Emerging Markets Index added 2 percent to 1,025.30 as all but one of the 10 best performers were Chinese companies. The Hang Seng China Enterprises Index led gains among 94 stock gauges, while the Shanghai Composite Index jumped 2.9 percent. The MSCI BRIC Index, which comprises equities in Brazil, Russia, India and China, rose the most in 16 months. The real rose the most among 31 major currencies tracked by Bloomberg.

China’s President Xi Jinping’s reforms are aimed at giving more influence to market forces and loosening government controls as the world’s second-biggest economy grows at the weakest pace since 1999. The plan was outlined after a Communist Party meeting last week. The yuan traded within 0.2 percent of a 20-year high, while the 10-year bond yield rose to the highest since 2007 as China said it would accelerate steps toward currency convertibility and a freeing-up of interest rates.

“They’re trying to get there,” Peter Jankovskis, who helps oversee $3.5 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said by phone. “There’s a long way between announcing a plan and seeing the results that you expect out of it, but it certainly seems to be a move in the right direction.”

Biggest Gains

All 10 groups in the MSCI Emerging Markets Index gained today, led by energy and financial shares. The iShares MSCI Emerging Markets Index exchange-traded fund added 0.9 percent to $42.63. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rallied 9.2 percent to 23.74.

Investors also watched Federal Reserve officials’ speeches for clues on when the central bank will start paring stimulus. Fed Bank of New York President William C. Dudley said he’s “getting more hopeful” the economy is strengthening. Fed Bank of Philadelphia President Charles Plosser said it’s “just not practical” to adjust the Fed’s pace of bond buying in response to changes in the economy because shifts cause confusion and the correct levels aren’t clear.

Brazil’s Ibovespa climbed for a third day amid bets on increasing exports to China, the nation’s biggest trading partner. Vale SA, the world’s biggest iron-ore producer, rallied 2.1 percent. Pulp producer Fibria Celulose SA rallied after announcing a land sale that will allow the company to pay part of its debt. The real appreciated 2.2 percent.

Russia, Poland

Russian stocks capped the longest stretch of gains in three weeks after billionaire Mikhail Prokhorov agreed to buy a stake in OAO Uralkali and as JPMorgan Chase & Co. recommended buying the nation’s equities. Uralkali jumped 2.3 percent to the highest level since Oct. 21. OAO Mechel, the nation’s biggest coking-coal producer, climbed 5.8 percent after agreeing to restructure its debt.

Poland’s WIG20 Index rallied to the highest level since Jan. 3, while benchmark gauges in Turkey and the Czech Republic advanced at least 1.2 percent. Hungary’s shares retreated.

China’s stocks rose, with the benchmark index for mainland companies in Hong Kong surging the most since December 2011. Citic Securities Co. and China Life Insurance Co. rallied more than 8 percent in Hong Kong and Shanghai to lead gains for financial shares.

“If Chinese economic reforms go through, they will rewrite global asset markets fundamentally,” Diana Choyleva, head of macroeconomic research at Lombard Street Research, said by phone from London. The changes “will pave the way for more reforms in the future and set the economy on a sustainable growth path thereafter,” she said.

Rupee Climbs

India’s S&P BSE Sensex rose 2.2 percent, its biggest advance since Oct. 18. HDFC Bank Ltd. jumped 4.1 percent, driving up an industry gauge to a two-week high. Cigarette maker ITC Ltd. advanced 3.7 percent, sending a measure of consumer companies to its biggest gain in two months. The rupee rallied the most in more than a month.

Indonesia’s rupiah fell toward a four-year low after overseas investors pulled money from local stocks as the economy slowed and the current-account deficit didn’t narrow significantly. Two-year government bonds dropped.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell one basis point, or 0.01 percentage point, to 331 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Zahra Hankir in London at zhankir@bloomberg.net; Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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