Emerging-Market Stocks Gain With Currencies on Fed Rate Outlook

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Emerging-market stocks rallied for a second day as traders boosted bets that the Federal Reserve will move slowly in raising the near-zero interest rates that have propped up demand for riskier assets.

A gauge of 20 developing-nation currencies jumped to a three-week high. Petroleo Brasileiro SA helped push the Ibovespa to a three-week high on speculation the Brazilian state-run oil producer is considering the sale of its less profitable plants. India’s S&P BSE Sensex index rose 1.1 percent, extending gains to a fifth day for its best streak since April. Chinese stocks headed for the biggest weekly drop since 2009 as share sales drained cash from the market.

The MSCI Emerging Markets Index rose 0.8 percent to 977.61, pushing its two-day jump to 1.3 percent. Stocks extended gains as data showed that U.S. inflation remains subdued. The report came a day after the Fed maintained its interest rate outlook for this year and lowered the forecast for 2016, bolstering the case for a slow increase in benchmark borrowing costs.

“The new Fed forecasts are helping emerging-market currencies and equities a bit today as the new ‘dot plot’ suggests a more gradual pace of Fed tightening,” Michael Wang, a London-based strategist at Amiya Capital LLP, said by e-mail. “The Fed is data dependent, so if the data picks up again then this could change.”

The developing-nation gauge has risen 2.2 percent this year and trades at 11.9 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 4.2 percent and is valued at a multiple of 16.6

Brazil, Russia

Walsin Lihwa Corp. jumped 10 percent in Taipei, the most since December 1993 and the biggest gainer in the emerging-markets index, after saying it plans a share buyback.

Nine out of 10 industry groups rose, led by health-care and consumer-staple stocks. China Resources Enterprise Ltd. jumped 8.2 percent in Hong Kong after the brewer said it will increase a special dividend as its parent offered HK$2 billion ($258 million) more to buy its assets than initially agreed.

A Bloomberg index of 20 developing-nation currencies jumped 0.3 percent, rising for a third day. Malaysia’s ringgit led gains, appreciating 1.3 percent against the dollar.

Petrobras rose 1.9 percent in Sao Paulo. The stock rallied after Reuters said the company, which is at the center of Brazil’s largest graft probe, is considering selling some biofuel assets, citing people familiar with the matter. The Ibovespa increased 1.9 percent.

The dollar-denominated RTS Index of Russian stocks jumped 1.6 percent. The ruble strengthened for a fourth day, gaining 0.3 percent to 53.45 per dollar.

China Warning

Turkey’s Borsa Istanbul 100 Index gained for a third day, adding 1.5 percent. Benchmark stock indexes in Hungary and the Czech Republic fell at least 0.9 percent as Chancellor Angela Merkel offered no concessions on a deal with Greece in a speech Thursday. Euro-area leaders will hold an emergency summit in Brussels on Monday to try and force a settlement.

The Shanghai Composite Index dropped 3.7 percent, taking a decrease this week to 7.4 percent. Hong Kong’s Hang Seng China Enterprises Index slipped 1.1 percent.

Analysts are increasingly warning the stock market is in a bubble that will burst after the gauge more than doubled in the past 12 months to reach its highest levels in seven years. Initial public offerings this week will lure about 6.7 trillion yuan ($1.1 trillion) of bids, according to a Bloomberg survey.

The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed seven basis points to 353 basis points, according to a JPMorgan Chase & Co. index.

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