Emerging-market stocks rose from a four-year low and Asian currencies strengthened as comments by China’s central bank calmed investors rattled by the biggest yuan depreciation in two decades.
The MSCI Emerging Markets Index climbed 0.4 percent to 864.80 after the People’s Bank of China, at a rare briefing on the currency, said it will take action when there are excessive price swings. Shares in Shanghai, and stocks in Indonesia and South Africa, which rely on China for exports, rose at least 1.5 percent as the comments eased concern that the yuan was headed for a disorderly drop.
A surprise devaluation of the yuan on Tuesday battered developing-nation assets, sending the MSCI gauge into a bear market on speculation that China’s economic slump is deepening and other countries will weaken their currencies to stay competitive. There’s no basis for the depreciation to persist, PBOC Assistant Governor Zhang Xiaohui said Thursday.
“With the PBOC stating strongly that it has no intention of allowing further depreciation, we are seeing a relief rally,” 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. “EM stocks have endured a heavy selloff since the end of June and technically the market is oversold.”
South Korea’s won jumped 1.4 percent, the most in developing nations. The Malaysian ringgit strengthened 0.4 percent from the lowest level since 1998. The Turkish lira slid to a record as coalition talks ended early.
The MSCI Emerging Markets Index’s 11 percent retreat this quarter pushed its 12-month forward price-to-earnings ratio to 11 on Wednesday, the cheapest since January and about a 32 percent discount to the MSCI World Index of developed-nation equities.
Bonds and currencies also recovered Thursday as the yuan’s decline slowed to 0.2 percent in Shanghai after a two-day loss of 2.8 percent. The premium investors demand to own emerging-nation debt over U.S. Treasuries narrowed six basis points from a five-month high to 378 basis points, according to JPMorgan Chase & Co. Indexes.
The Ibovespa slumped 0.8 percent and the real weakened 1.2 percent as Banco do Brasil SA was the latest Brazilian lender to allocate more money for soured loans amid forecasts for the worst recession in 25 years.
Turkish assets, which had been outperforming this week, retreated after a meeting between Turkey’s two biggest political parties to agree on coalition terms ended in less than two hours. The Borsa Istanbul 100 Index slid 1.4 percent. The lira weakened 1.6 percent against the dollar.
Turkey is headed for early elections after coalition negotiations with the opposition CHP Party failed, Prime Minister Ahmet Davutoglu said on Thursday. The AK Party offered to establish a coalition government that would rule only until new elections are held, a proposal that the CHP rejected, Davutoglu said.
The ruble slumped 0.8 percent and the Micex Index jumped 0.4 percent in Moscow. Gains in oil producers including OAO Rosneft and OAO Surgutneftegas propped up the stock benchmark as Goldman Sachs Group Inc. said investors should consider buying the shares of Russian energy companies as second-quarter results are set to improve.