Emerging Stocks Gain as Greek Deal Boosts East Europe Currencies

Updated on

Emerging-market stocks rallied for a third day as Greece’s agreement with creditors spurred demand for riskier assets and data showed China’s economy is stabilizing. Most eastern European currencies strengthened against the euro.

The MSCI Emerging Markets Index climbed 1.1 percent to 943.01. The gauge rallied 4.3 percent in its biggest three-day gain this year. Gol Linhas Aereas Inteligentes SA rose the most in Brazil after Delta Air Lines Inc. said it will boost investments in the discount carrier. Stocks advanced 2.4 percent in Shanghai as more companies resumed trading and exports rose for the first time in four months in June. Poland’s zloty and Hungary’s forint appreciated at least 0.3 percent.

By reducing the likelihood that Greece will exit the European currency union, the accord between the country and its creditors could help stem outflows from developing nations. Investors pulled more than $1.1 billion out of U.S. exchange-traded funds that invest in emerging markets for the second straight week, the worst run since December.

“If things calm down in Greece, investors are more willing to invest in riskier places, like emerging markets,” Hertta Alava, the head of emerging markets at FIM Asset Management Ltd. in Helsinki, said by e-mail. Signs that China’s real economy “seems to be stabilizing” also boosted sentiment, she said.

Greek Prime Minister Alexis Tsipras achieved a settlement with his European creditors after almost 17 hours of talks in Brussels ended Monday morning. The deal will include a recapitalization of Greek banks.

Fed Shadow

The optimism spread across eastern Europe as many countries in the region count the euro zone as their main trading partner. Eurobonds of Romania and Bulgaria, where four Greek lenders operate units, advanced.

The zloty gained 1 percent the the strongest level versus the euro on a closing basis since June 11. The forint increased 0.3 percent, rising for a third day. The Borsa Istanbul 100 Index added 0.7 percent.

While currencies climbed against the euro, a gauge tracking 20 of them versus the dollar weakened for the first time in three days, slipping 0.2 percent. The Greek bailout may bolster the case for the U.S. Federal Reserve to start its first interest-rate increases since 2006, threatening to damp demand for riskier assets. Fed Chair Janet Yellen said last week she still expected to raise borrowing costs in 2015 as the U.S. economy improves.

Iran Accord

Gol surged 15 percent. It was the biggest gain in Brazil’s Ibovespa stock benchmark, which added 1 percent. The real rose 0.8 percent against the dollar.

The ruble slid 0.2 percent as oil, Russia’s biggest export, ended a four-day gain. Brent crude retreated 1.5 percent to $57.85 a barrel in London.

Diplomats continued negotiating toward a nuclear deal for Iran after a political agreement was reached to lift a United Nations arms embargo. The accord raised the prospect for Iran to boost crude exports in an oversupplied market.

All 10 industry groups in the MSCI Emerging Markets Index gained, led by raw-material companies.

Hong Kong’s Hang Seng China Enterprises Index gained 1.2 percent. The Shanghai Composite Index climbed for a third day, with a gauge of smaller companies capping its biggest advance since 2008. The number of halted companies fell by 408 from Friday to 1,045, or 36 percent of total listings on mainland exchanges.

The Shanghai index has rebounded 13 percent in three days after government intervention to end a rout that wiped almost $4 trillion of value. Exports rose 2.1 percent in June, compared with a median estimate for a 1.2 percent gain.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE