Emerging-Market Stocks Advance for a Second Day, Ruble Declines

Can Russia Handle Ruble-Dollar Weakening to 100?
  • Gulf shares fall on oil, stimulus talk bolsters Asian indexes
  • Gains driven by positive sentiment from Friday, Lopez Says

Emerging-market stocks staged their biggest two-day rally since September as investors bet some of the world’s leading central banks will boost stimulus to prop up assets. Russian assets and a gauge of Gulf shares declined with oil.

Nine out of 10 groups in the MSCI Emerging Markets Index rose, led by industrial shares, extending an advance on Friday that was the most since August. Colombia’s peso, the ruble, and the Mexican peso pushed a measure of emerging-market currencies down for the first time in three days, while most of the Asian currencies strengthened.

The rally in emerging-market stocks was helped by “the positive momentum from Friday’s trading, which was driven by the prospect of more stimulus from the European Central Bank,” said Soledad Lopez, an emerging-markets strategist in the Chief Investment Office at UBS Wealth Management, which oversees $1.9 trillion. 

Growing speculation central banks will cut or avoid raising interest rates buoyed Asian markets in the midst of the worst start on record for global stocks. European Central Bank President Mario Draghi signaled Thursday that stimulus programs may be boosted as early as March. Oil, which gave up early gains on Monday to fall 5.8 percent on concerns about continued oversupply in the market, remains a destabilizing factor.

Stocks

The MSCI Emerging Markets Index rose 0.8 percent to close at 716.08. The gauge has fallen 9.8 percent this year and is trading at 10.5 times its projected 12-month earnings, compared with about 15 for the MSCI World Index.

Russia’s Micex benchmark share measure fell 0.1 percent after rallying more than 5 percent over the previous two days. The BGCC 200 Index of stocks in the oil-exporting Gulf Cooperation Council fell 0.5 percent, erasing an earlier increase of as much as 0.2 percent. Brent crude, which rallied 15 percent over the previous two days, fell 4 percent after Saudi Aramco said it’s sustaining investments and data showed Chinese consumption of diesel declined in December.

Investors pulled more than $1 billion out of U.S. exchange-traded funds that invest in emerging-markets as a third week of outflows left the ETFs down $3.9 billion this month.

The Hang Seng China Enterprises Index of mainland shares in Hong Kong closed up 0.8 percent, as did the Shanghai Composite Index. The index, whose gyrations at the start of the year sparked the global selloff, ended up 1.3 percent on Friday. Taiwan’s main gauge closed up by 1.8 percent, Indonesian shares increased 1.1 percent and South Korea’s Kospi index rose 0.7 percent.

Currencies

The developing-nation currencies gauge lost 0.5 percent, following a 1 percent jump on Friday after it fell to an unprecedented low two days earlier. The ruble dropped 2.5 percent, the second-most among emerging-market currencies, after a 5.6 percent surge on Friday. The Colombian peso declined 2.7 percent and Turkey’s lira weakened 0.7 percent as central bank Governor Erdem Basci said it’s too early to move to a single-rate policy.

The won rose 0.5 percent, the biggest gainer among 24 emerging-market currencies tracked by Bloomberg. The won had its largest two-day gain since October as investors bet a government report to be released on Tuesday will show South Korea’s fourth-quarter growth quickened from a year ago.

“Emerging-market currencies have benefited from expectations of more central bank policy easing,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “I think the market is generally hopeful that the Federal Reserve may highlight the risk to inflation from lower oil prices and therefore push back against expectations of tightening” this week, he said.

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