Emerging Stocks Climb to 6-Month High on Greek Bailout Prospects
Emerging-market stocks rose to a six- month high as Greek leaders worked on an austerity deal needed to qualify the debt-ridden nation for a second rescue package.
The MSCI Emerging Markets Index (MXEF) gained 1.2 percent to 1,060.70 at the close in New York, the highest since Aug. 4. The Shanghai Composite Index (SHCOMP) advanced 2.4 percent while Taiwan’s Taiex Index (TWSE) climbed 2.1 percent. Russia’s (INDEXCF) Micex Index gained for the first day this week as UBS AG upgraded the country’s equities to “overweight.” Brazil’s Bovespa index retreated from a nine-month high.
Greece will pledge permanent spending cuts, including lower pension payments and a 20 percent reduction in the minimum wage, according to a draft of its new financing deal with the European Union and International Monetary Fund. Greek Prime Minister Lucas Papademos is negotiating with political parties supporting his government on measures needed to qualify for the 130 million euro ($172 billion) bailout.
“ It does seem like we’re heading toward some type of resolution in Greece,” Greg Lesko, who manages $700 million at Deltec Asset Management in New York, said by phone. “That risk of a meltdown has been taken away so people are taking more risk.”
Papademos yesterday held an unscheduled meeting with the so-called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, to put the final touches on the aid package. At stake is whether Greece wins the bailout, secures a debt write-off with private creditors and remains in the euro region. The impact of a Greek exit from the euro would be “incalculable,” Merkel said yesterday.
Chinese consumer prices probably rose 4 percent in January, down from a 4.1 percent gain in December, according to 33 economists’ estimates compiled by Bloomberg. Inflation may slow to as low as 3.2 percent in February from a three-year high of 6.5 percent in July, Bank of America Corp. said.
The Bovespa (IBOV) fell 0.1 percent after rising yesterday to the highest since April 29. Redecard SA (RDCD3), Brazil’s second-biggest card-payment processor, rose 2.8 percent, above the price Itau Unibanco Holding SA offered minority shareholders yesterday on speculation Itau will raise its bid.
The Micex Index added 0.4 percent, led by United Co. Rusal as Deputy Chief Executive Officer Oleg Mukhamedshin said demand for aluminum will continue to increase as manufacturers switch to the light metal.
UBS raised its recommendation on Russia stocks to “overweight” as investors return to assets perceived as posing higher risk and the shares trade at a discount to global markets, analyst Nicholas Smithie wrote in an e-mailed report. The report didn’t detail the previous recommendation.
The ISE National 100 Index climbed 1 percent in Istanbul. Gozde Girisim Sermayesi Yatirim Ortakligi AS (GOZDE), a private equity firm owned by Yildiz Holding AS, jumped 6.1 percent after saying it will conclude acquisitions worth as much as $1 billion each year.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 382, according to JPMorgan Chase & Co.’s EMBI Global Index.