Emerging-market stocks posted the biggest two-day gain since 2013 and currencies strengthened as government intervention helped Chinese stocks rebound and optimism grew that Greece will get a bailout.
The MSCI Emerging Markets Index climbed 1.5 percent to 933.20, taking its recovery from a two-year low to 3.2 percent. The gauge lost 15 percent since April through July 8 as concern mounted a rally in China fueled by margin lending was unsustainable. The measure formed a bearish chart pattern called the “death cross” this week after Greeks rejected an austerity plan proposed by European creditors.
The slump paused, with Shanghai stocks recovering 11 percent in the last two days, as China limited trading to half of the market, banned executives from selling stakes in listed entities for six months, ordered companies to buy equities and began a probe into short-selling. In the euro area, France praised and Germany withheld judgment on the latest proposals from Greece, brightening the prospects of a deal.
“The Chinese government has effectively manipulated a double-digit rally in the equity market over the past days with a highly aggressive series of interventions that have provided an illusion of stabilization,” Nathan Griffiths, a senior emerging-market equities manager who helps oversee $1.2 billion at NN Investment Partners in The Hague, said by e-mail. “Since yesterday evening, the likelihood of a Greek deal has increased substantially.”
French President Francois Hollande praised the package of spending cuts, pension savings and tax increases proposed by Greece as “serious, credible” ideas that demonstrated the nation’s determination to stay in the euro zone. Euro-area officials will examine the proposals in Brussels on Friday, while the Greek parliament takes it up later the same day.
The currencies of Eastern European nations, which derive most of their trade from the European Union, rallied. Hungary’s forint, Poland’s zloty and Romania’s leu each strengthened more than 1.7 percent against the dollar and at least 0.6 percent versus the euro. A gauge of 20 emerging-market currencies climbed 0.7 percent, reducing its third weekly decline.
Russia’s ruble strengthened for a second day, rising 1.6 percent against the dollar, as Morgan Stanley said the nation’s economy wouldn’t shrink as much as earlier anticipated. The dollar-denominated RTS Index jumped 1.7 percent.
Lender Itau Unibanco Holding SA jumped 3 percent in Sao Paulo, leading a 1.6 percent gain in the Ibovespa. Brazil’s real rose 1.9 percent against the dollar.
The Shanghai Composite Index rallied 4.5 percent. The rebound pared losses since the measure’s June 12 high to 25 percent. While the median price-to-earnings ratio in China has dropped to 57 from 108 at the peak of the rally, valuations are almost three times as high as those of U.S. shares. Fidelity Investments, which oversees the largest China funds outside of the mainland, says Chinese stocks are a buy following the selloff.
All 10 industry groups in the developing-nations measure rose, led by financial stocks. The gauge has slumped 3.3 percent this week and is down 2.5 percent since the start of the year. It trades at 11.4 times the projected earnings of its members, compared with a multiple of 16.2 for the MSCI World Index of advanced-nation equities.
The 50-day moving average of the emerging-markets index crossed below the 100-day mean on Thursday. To some technical analysts, the pattern signals further declines.
The premium investors demand to hold emerging-market debt over U.S. Treasuries narrowed 14 basis points to 340 basis points, according to JPMorgan Chase & Co. indexes.