Emerging-Markets Rise on Fed as Ruble, Ringgit Gains With Oil

Is It Time to Get Back into Emerging Markets?
  • Energy producers lead MSCI index advance for second day
  • Societe Generale forecasts rally in oil-linked currencies

Emerging-market stocks rose to a two-week high and currencies gained as oil jumped to above $34 a barrel and bets that the Federal Reserve will refrain from raising interest rates anytime soon boosted risk appetite.

Companies such as South Korea’s Samsung Life Insurance Co. and Thailand’s PTT Exploration and Production PCL pushed both consumer and energy gauges to a three-week high. Russia’s ruble jumped to a two-week high against the dollar. Malaysia’s ringgit climbed to a seven-week high after Prime Minister Najib Razak maintained his fiscal-deficit target. 

U.S. policy makers are “closely monitoring” developments from China to Europe and lower oil prices for any adverse impact on the U.S. economy, the Fed said on Wednesday in its first statement since its December interest-rate increase. More than $2.5 trillion has been wiped off the value of emerging-market equities this month as a slump in commodities and China’s deepest economic slowdown since 1990 roiled global markets.

“The Fed’s statement is a net positive to the emerging markets,” Alan Gayle, senior strategist at RidgeWorth Investments who helps oversee $39 billion in assets, said via the phone from Atlanta. “The emerging markets have been under a lot of stress and so the balancing in commodities is being reflected” in the rebound, he said.

Futures traders see less than a one-in-five chance the Fed will raise rates at its meeting in March, down from 51 percent at the start of this year, data compiled by Bloomberg show. Brent crude climbed 2.7 percent to $34 a barrel on Thursday and rose as high as $35.84 a barrel after Russia’s energy minister said that OPEC and other producers will meet in February to discuss output. The commodity gave up some gains as other member countries said no talks were planned.

Stocks

The MSCI Emerging Markets Index rose 0.9 percent to close at 722.23, paring a monthly loss to 9 percent, the worst start to a year since 2009. Developing-nation stocks trade at an average 10.9 times projected 12-month earnings, a 28 percent discount to advanced-country shares in the MSCI World Index, data compiled by Bloomberg show.

The Bloomberg GCC 200 Index of Gulf stocks advanced 2.8 percent, extending this week’s rally to 6.8 percent. Equity gauges in Saudi Arabia, Dubai and Qatar jumped more than 3 percent on Thursday.

The Philippine Stock Exchange Index advanced to a three-week high after a report showed the nation’s economic growth quickened in the fourth quarter.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 0.9 percent. The Shanghai Composite Index fell 2.9 percent, extending a three-day decline to 9.6 percent, as concern a weakening economy will reduce corporate profits overshadowed the biggest cash injection into the financial markets in three years.

Samsung Electronics slumped 2.6 percent after the South Korean conglomerate joined Apple Inc. in warning of slowing demand and economic turbulence, reporting a 39 percent drop in fourth-quarter profit.

Currencies

A Bloomberg gauge of 20 emerging-market currencies rose for a third day, climbing 0.8 percent and paring a monthly drop to 2 percent.

The ruble followed oil higher, strengthening 2.3 percent to 76.3 against the dollar. Bank of America Corp. said the nation’s assets offer the best returns should crude extend gains. Russia’s central bank will keep rates on hold at 11 percent at its meeting Friday, according to all 42 economists in a Bloomberg survey.

The Colombian peso soared 2.2 percent, while currencies from Indonesia, Brazil and South Africa strengthened at least 0.7 percent. The rand rallied as much as 1.5 percent after South Africa’s central bank boost the size of interest-rate increases.

Mexico’s peso pared gains and dipped 0.1 percent after the central bank announced it would not boost the size of daily dollar auctions. The ringgit advanced 0.9 percent as the prime minister also announced measures to shore up an economy hit by a plunge in oil. The Brazilian real retreated 1.4 percent, the worst performer among major emerging markets tracked by Bloomberg.

Bonds

The premium investors demand to hold emerging-market debt over U.S. Treasuries narrowed to 462, according to JPMorgan Chase & Co. indexes.

Russian government five-year notes advanced for a third day, reducing the yield 20 basis points to 10.15 percent, the lowest since Jan. 8. The rate on two-year Turkish securities slid two basis points to 10.73 percent.

Chinese bonds gained, with the yield on 10-year notes slipping two basis points to 2.85 percent. The People’s Bank of China used this week’s two money-market operations to add the most funds to the financial system in three years, helping to prevent a cash crunch before the week-long Lunar New Year holiday. The week’s net injection of 590 billion yuan ($89.7 billion) was the biggest since February 2013, data compiled by Bloomberg show.

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