Emerging Stocks Rise to 2016 High as Egypt Rallies Most in World

  • EGX 30 Index surges as Egypt Central Bank devalues currency
  • Chinese equities advance as regulator signals market support

Emerging-market stocks extended a two-week rally after Chinese officials reaffirmed support for the nation’s equities and Egyptian shares rose the most since July 2013 as the central bank devalued the pound. Currencies retreated with commodities.

The MSCI Emerging Markets Index traded within 2.8 percent of the threshold of a bull market. China’s benchmark jumped as regulators signaled they might go slow on policy changes that could flood exchanges with new shares. Cairo-traded stocks surged and Egypt’s pound weakened as much as 14 percent after the central bank announced plans to adopt a more flexible exchange rate. South Africa’s rand and Russia’s ruble declined as crude oil retreated. Brazil’s Ibovespa ended a two-day gain as raw-material prices dropped.

Demand for riskier assets is increasing before central banks in Japan and the U.S. review policy after last week’s announcement of unprecedented stimulus by the European Central Bank and monetary easing in China earlier this month. The push by policy makers to support asset prices and oil’s rebound from a 13-year low have driven emerging-market shares up 8.6 percent in March, led by bank shares as well as energy and commodity producers such as Gazprom PJSC in Russia and Brazil’s Vale SA.

“There is a general improvement in risk appetite and sentiment toward emerging markets,” said William Jackson, an analyst at London-based Capital Economics Ltd. “We think emerging assets will continue to perform strongly over the remainder of this year as data from China improves and commodity prices rise.”

Stock Advance

The MSCI Emerging Markets Index rose 0.3 percent to 803.45. The measure advanced to the highest closing level this year after dropping for four straight months. Eight of 10 industry groups advanced on Monday, led by technology and financial stocks.

The measure is up 1.2 percent this year compared with a 2.1 percent drop in advanced-nation stocks. The emerging-market benchmark trades at 11.5 times the projected 12-month earnings of its constituents, a 27 percent discount to the MSCI World Index’s 15.8 multiple, data compiled by Bloomberg show.

Investors added $1.67 billion to U.S. exchange-traded funds that buy emerging market stocks and bonds last week, marking the longest winning streak since May.

Egypt Rally

The Shanghai Composite Index advanced 1.8 percent. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong increased 1.5 percent to a two-month high.

Egyptian stocks entered a bull market on the devaluation news, as investors 644 million shares changed hands, about three times the six-month average. Commercial International Bank Egypt SAE’s 6.8 percent gain was the biggest contributor to the gauge’s increase.

The Ibovespa dropped 1.6 percent. State-controlled Petroleo Brasileiro SA contributed the most the decline, slumping 8.5 percent. Brent crude declined 2.1 percent to $39.53 a barrel, while the Bloomberg Commodity Index retreated 0.7 percent from the highest level this year.

The Jakarta Composite Index advanced 1.3 percent to close at its highest level since July, while South Africa’s FTSE/JSE Africa All Share Index rose 1.4 percent.

Currency Slump

A Bloomberg gauge of 20 emerging-market currencies declined 0.4 percent. The measure jumped 3.6 percent in the past two weeks as oil rose above $40 a barrel and the ECB boosted stimulus.

The rand declined 2 percent against the dollar as a South African police unit said Finance Minister Pravin Gordhan had been asked to assist with a tax investigation. The South African Reserve Bank will announce its rate decision on Thursday.

The ruble weakened 0.1 percent. Turkey’s lira ended a four-day rally to fall 0.1 percent after a deadly bomb blast in Ankara. Brazil’s real fell 2 percent.

The 10-year yield in Indonesia fell four basis points to 7.74 percent, the lowest since April. Eleven of 20 analysts in a Bloomberg survey predict the nation’s central bank will cut its benchmark rate to 6.75 percent on Thursday, with the rest expecting it will be held at 7 percent following two reductions this year.

India’s 10-year yield fell two basis point to 7.61 percent, the lowest this month, while that on comparable South Korean bonds was little changed at 1.91 percent.

Russia’s 10-year bonds declined for a fifth day, pushing the yield up 10 basis points to 9.43 percent.

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