Emerging Stocks Rise to Six-Week High as Energy Companies Rally

The Relief Factor in Emerging Markets
  • Gauge of energy shares rises to highest level since Jan. 5
  • Brazilian stocks, currency weaken after S&P downgrades banks

Emerging-market stocks rose to a six-week high as energy companies extended a rebound from the lowest level since 2004. Mexico’s peso strengthened for a second day after policy makers announced an interest-rate increase and other measures to shore up the currency.

Lukoil PJSC led the Micex Index in Moscow to the highest level since November. A gauge of shares in the oil-exporting Gulf Cooperation Council rose to a five-week high. Malaysia’s ringgit strengthened the most in a week after better-than-forecast growth data. The Ibovespa equity gauge declined and the real weakened after Standard & Poor’s cut the credit ratings of several Brazilian lenders further into junk territory following a sovereign downgrade.

Moves by Saudi Arabia and Russia to freeze production at near-record levels has helped improve sentiment toward developing countries this week by shoring up oil prices, muting the affect of S&P’s decision to cut credit ratings of Brazil and four oil producers in eastern Europe and the Middle East. Mexico’s peso defense and comments from a Federal Reserve board member on delays in U.S. rate increases also boosted speculation that central banks will take steps to shore up confidence.

“With the Mexico rate hike and the beginning of OPEC coordination to freeze output, there is a feeling in the market that officials are making moves to dampen market jitters,” said Guillaume Tresca, a strategist at Credit Agricole SA in Paris. "The ratings downgrades should be negative but the risk-on sentiment has dampened the impact. We are keeping a cautious stance."

Oil Prices

The MSCI Emerging Markets Index advanced 1.4 percent to 746.24 as all 10 of its industry groups climbed. A measure of energy companies increased 1.7 percent, pushing its five-day advance to 8.7 percent.

A Bloomberg gauge tracking 20 developing-nation currencies dipped for a second day, while the premium investors demand to own emerging-country debt over U.S. Treasuries increased for the first time in four days. A four-day gain in the MSCI stock gauge has trimmed losses this year to 6 percent, compared with a 7.2 percent drop in the MSCI World Index of advanced-country shares.

The Micex Index increased 2.1 percent, posting its longest stretch of advances since November, as Lukoil rallied 4 percent. Iran backs any measures to stabilize markets including the output cap, Oil Minister Bijan Namdar Zanganeh said after talks with Qatar, Iraq and Venezuela, according to a report from the Shana news service.

Brent crude sold for as much as $35.73 a barrel on Thursday after dipping to below $28, the lowest price since 2003, on Jan. 20. It settled at $34.28. West Texas Intermediate for March delivery rose 11 cents to close at $30.77. The Bloomberg GCC 200 Index added 1.1 percent, extending gains for a fourth day. Indexes in Qatar, Abu Dhabi and Saudi Arabia climbed at least 1.4 percent.

Ringgit, Rupiah

The Hang Seng China Enterprises Index jumped 3 percent, the most among Asian benchmarks, as PetroChina Co. soared 6 percent to this year’s highest level. A gauge of consumer-staples and discretionary companies in the CSI 300 slipped 0.3 percent after a government report showed inflation picked up in January on rising food prices.

The ringgit advanced 1.2 percent against the dollar. Malaysia’s gross domestic product expanded 4.5 percent in the three months through December, beating the 4.1 percent median estimate in a Bloomberg News survey.

The rupiah trimmed gains to 0.1 percent after Indonesia’s central bank cut its benchmark reference rate by 25 basis points and lowered its primary reserve-requirement ratio for lenders to shore up an economy hit by slumping exports.

Peso Rebound

Mexico’s peso rose 0.4 percent after rallying the most since 2011 on Wednesday when policy makers unexpectedly said borrowing costs will increase 0.5 percentage point to 3.75 percent, citing the risk that the currency’s depreciation would fuel inflation.

Brazil’s real weakened 1 percent. The Ibovespa slipped 0.4 percent, halting a four-day advance. The emerging-market premium over Treasuries increased five basis points to 476, according to JPMorgan Chase & Co. indexes.

Russian 10-year government bonds rose, pushing the yield down 17 basis points to below 10 percent for the first time since Jan. 8. Slovak, Hungarian and Polish and Czech bonds rose while Romanian bonds declined.

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