Emerging Stocks Extend Rally on China Spending, Europe Stimulus
Emerging-market stocks rose for a second day on speculation China will boost infrastructure spending, European leaders will take action to stimulate economic growth and sales of U.S. homes rose.
The MSCI Emerging Markets Index (MXEF) advanced 0.6 percent to 919.28 by 4:33 p.m. in New York, extending yesterday’s 0.7 percent rebound from the lowest close in five months. Russia’s Micex Index rose as OAO Mechel (MTLR), the nation’s largest producer of coal for steelmakers, climbed 5.3 percent. Brazil’s Bovespa tumbled 2.7 percent as homebuilder PDG Realty SA Empreendimentos & Participacoes plunged 11 percent.
China plans to speed up approval of infrastructure projects and allocate construction funding faster to improve growth, the China Securities Journal reported. European leaders will do “everything necessary” to keep Greece in the 17-nation euro and focus on steps to aid economic expansion, German Finance Minister Wolfgang Schaeuble said yesterday.
Emerging-market equities have added 0.3 percent in 2012 and trade at a multiple of 9.8 times estimated earnings, compared with the average of 11.7 for developed nations, which have advanced 1.5 percent this year.
The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, rose 0.9 percent to 33.56.
The Micex Index rose 0.2 percent as OAO Mechel added the most since May 10. OAO Lukoil, Russia’s biggest non-state oil producer, retreated 0.5 percent as crude oil slid as much as 1.3 percent in New York.
The BUX Index (BUX) advanced 0.9 percent in Budapest, posting its longest winning streak in two months. Magyar Telekom Nyrt. (MTELEKOM), the Hungarian unit of Deutsche Telekom AG, rose 2.9 percent, the most since Feb. 17.
Brazil’s Bovespa retreated as homebuilders dropped on speculation policy makers will slow the pace of interest-rate cuts. PDG Realty slipped the most since November 2008 while Gafisa S.A., a real estate developer, plunged 9.9 percent.
The WIG20 Index (WIG20) added 0.2 percent in Warsaw today. The FTSE/JSE Africa All Share Index (JALSH) rose 1.2 percent in Johannesburg. South Korea’s Kospi Index (KOSPI) climbed 1.6 percent and the Czech Republic’s gauge added 1 percent.
The BSE India Sensitive Index (SENSEX), or Sensex, dropped 1 percent, the most among major benchmark indexes in Asia. Concern India’s outlook has worsened because of trade and fiscal shortfalls, policy gridlock and elevated consumer prices has made the rupee Asia’s worst-performer since April 1.
Sentiment among investors in emerging-market equities has reached “panic” levels, Citigroup Inc. said. The developing- nations gauge has slid 15 percent from its year-high on March 2.
Emerging-market stocks have advanced an average 7.5 percent in a six-month period and 23 percent in a year on past occasions when Citigroup’s “Whether Vane” has been at such levels, New- York-based analysts Geoffrey Dennis, Howard Park and Christina Wood wrote in an e-mailed note to clients dated yesterday.
Premier Wen Jiabao pledged to adopt a “proactive fiscal policy and a prudent monetary policy” to shore up the world’s second-largest economy. A leading index for China rose 0.8 percent in April, the same pace as the prior month, the New York-based Conference Board said in a statement today.
The Hang Seng China Enterprises Index (HSCEI) of Chinese stocks listed in Hong Kong rose 1.2 percent, the most since April 30. Anhui Conch Cement Co. (914), the biggest Chinese cement producer, gained 3.5 percent in Hong Kong, on speculation China will boost infrastructure spending. Zoomlion Heavy Industry Science & Technology Co. (1157) jumped 6.9 percent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries slid 7 basis points, or 0.07 percentage point, to 395, according to JPMorgan Chase & Co.’s EMBI Global Index.