- Fed left rates unchanged, helping appetite for riskier assets
- Russian ruble advances for second day as crude oil rallies
Emerging-market stocks rose as the Federal Reserve left U.S. interest rates unchanged at its first policy meeting of the year and investors speculated that counterparts in Europe and Japan will bolster their record stimulus. The ruble gained with oil for a second day.
The MSCI Emerging Markets Index rose 1.1 percent to 715.98 in New York. Nine out of 10 industry groups advanced, led by a 1.9 percent jump in a gauge of energy stocks as Brent crude climbed 4.1 percent. The ruble and Malaysia’s ringgit gained the most among developing-market currencies, advancing at least 0.8 percent.
The Federal Open Market Committee is “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” the central bank said in a statement Wednesday following a two-day meeting in Washington. The median projection of policy makers’ forecasts in December called for four quarter-point rate increases in 2016; futures markets indicate that traders see fewer.
The Fed’s comments that global markets “are an important gauge for them is a dovish signal,’ Quincy M. Krosby, a market strategist at Prudential Financial Inc., which oversees about $1.2 trillion, said by telephone from Newark, New Jersey. “It means that if the situation deteriorates further,” the Fed might hold off on another interest rate hike, “which is good for developing nations,” she said.
Emerging markets have taken some respite after concern over China’s worsening economic outlook spurred a selloff that erased more than $2.5 trillion from the value of equities in developing nations this year. The turmoil has led traders to push back bets on the Fed’s rate increase, while European Central Bank President Mario Draghi signaled last week further stimulus may be necessary in March. The Bank of Japan meets on Friday.
The MSCI Emerging Markets Index has dropped 9.8 percent this year and is valued at 10.5 times its 12-month estimated earnings. That compares with an 8 percent decline in the MSCI World Index which is trading at multiple of 14.6.
Shares in Russia and Argentina rose at least 2.5 percent on Wednesday. Brazil’s benchmark stock gauge rallied 2.3 percent amid a rebound in power utilities. Turkey’s lira gained for a second day, so did Malaysia’s ringgit as Prime Minister Najib Razak was cleared in a corruption probe. The extra yield investors demand to own developing-nation debt over U.S. Treasuries widened for the second time this week.
The Bloomberg GCC 200 Index of Gulf stocks rose 1.7 percent to a one-week high, led by Saudi Basic Industries Corp., which gained 2.3 percent. Shares in Dubai and Qatar gained at least 2 percent.
The Kospi Index increased 1.4 percent after South Korea eased stock-trading regulations for foreign investors as the country seeks the status of a developed nation in MSCI Inc.’s equity indexes. Samsung Electronics Co. rose to a three-week high.
The Shanghai Composite Index dropped 0.5 percent, after losing as much as 4.1 percent. The Hong Kong China Enterprises Index gained 0.8 percent. Cumulative profits of China’s industrial enterprises fell 2.3 percent in 2015, the National Bureau of Statistics said Wednesday, after a 3.3 percent gain the prior year that was the weakest in at least 15 years.
The ringgit advanced 0.9 percent as a rally in Brent crude on Tuesday bolstered the outlook for Asia’s only major oil exporter. With Najib now able to give his full attention to an economy hit by a slump in commodities, focus will be on Thursday’s budget revisions for a clearer picture on the outlook.
“With the political risk out of the way, sentiment has improved,” said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. in Singapore. “Oil is also a big factor” and a rally in the benchmark stock index indicates investors think the budget “won’t be too negative.”