Emerging Stocks Rebound as Currencies Gain on Fed Rate Outlook

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Emerging-market stocks ended a three-day decline and currencies from Brazil to South Africa strengthened as U.S. jobs data fueled speculation that the Federal Reserve won’t start raising interest rates anytime soon.

The MSCI Emerging Markets Index added 1 percent to 1,034.94, reducing its loss this week to 1.1 percent. While figures showed U.S. payrolls rebounded in April, revised data for the previous month reflected a bigger setback than previously estimated. Investors in riskier markets are looking for clues on the timing of the Fed’s first rate increase since 2006, which threatens to damp the appeal of their assets.

“The U.S. numbers are not bad, but they are not strong enough to really make markets convinced that we’ll get this hike any time soon,” Anders Svendsen, an analyst at Nordea Bank AB in Copenhagen, said by phone. “This supports a few good months for EM.”

The real gained 1.7 percent against the dollar, leading currencies higher on speculation Brazil’s central bank will keep raising borrowing costs as U.S. rates remain low. The South African rand strengthened 0.9 percent. The ruble slid 1.3 percent as oil, Russia’s biggest export, posted a weekly decline. An index tracking 20 developing-nation currencies jumped 0.1 percent after reversing a decline as the U.S. jobs data were released.

The Shanghai Composite Index increased 2.3 percent, paring the biggest weekly drop in five years, on speculation China will take steps to shore up the economy after disappointing export data. Indian equities rallied 1.9 percent Friday, the steepest one-day gain since January. The Ibovespa increased 0.4 percent in Sao Paulo.

Relative Value

Nine out of 10 industry groups in the developing-nation stock index rose, led by a 2.3 percent gain in health care companies. The broader gauge has outperformed its counterpart this year, with a 8.2 percent advance versus a 5 percent gain for the MSCI World Index. Emerging-market shares still trade at a 26 percent discount to their developed-country peers, according to data compiled by Bloomberg.

The S&P BSE Sensex Index climbed for the first time in four days after closing more than 10 percent below its Jan. 29 record high on Thursday. The FTSE/JSE Africa All Share Index added 1 percent in Johannesburg.

China Stimulus

Friday’s advance reduced the Shanghai Composite weekly decline to 5.3 percent, the most since July 2010. The Hang Seng China Enterprises Index rose 2 percent, ending a three-day slide. A 6.2 percent retreat in Chinese exports helped bolster stocks amid bets the data will push the government announce stimulus measures.

“Most investors are hopeful for more stimulus in China,” Attila Vajda, managing director at Project Asia Research & Consulting Pte., said from Ho Chi Minh City. “We can probably see volatility in bond and equity markets as they look at the payrolls data to gauge the timing of a rate rise.”

China Taiping Insurance Holdings Co. surged 9.5 percent after people with knowledge of the matter said China’s two richest technology moguls joined its $1.7 billion share sale. Funds backed by Alibaba Group Holding Ltd. founder Jack Ma and Tencent Holdings Ltd. chairman Ma Huateng are buying shares in the insurer’s private placement, the people said on Thursday.

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