Emerging-Market Stocks Rise on China, U.S. Stimulus Speculation
Emerging-market stocks rose as investors speculated Chinese and U.S. policy makers will take steps to boost growth in the world’s largest economies as applications for U.S. unemployment benefits climbed.
The MSCI Emerging Markets Index (VXEEM) climbed 0.5 percent to 974.09. Russia’s Micex Index added 0.5 percent with United Co. Rusal, the world’s biggest aluminum producer, leading the gains. Chinese shares posted the biggest advance in almost three weeks. Brazil’s Bovespa stock index slid with Vale SA, the world’s largest iron-producer, among the decliners.
Chinese data signaled the nation’s manufacturing may contract at a faster pace this month, fueling speculation the People’s Bank of China will ease monetary policy a day after Governor Zhou Xiaochuan said adjustments to borrowing costs can’t be ruled out. Federal Reserve Bank of Chicago President Charles Evans, speaking to reporters in Beijing, urged looser monetary policy around the world. Jobless claims in the U.S. climbed to a one-month high last week.
“The optimism in the market carries from expectation that central banks are moving toward a position of policy easing and stimulus support,” Aryam Vazquez, an economist for global emerging markets at Wells Fargo & Co., said by phone from Miami. “The job number today was far from great, and that plays into the very dovish tone from the Fed.”
EM ETF Slides
The iShares MSCI Emerging Markets Index (MXEF) exchange-traded fund, the ETF tracking developing-nation shares, dropped 0.9 percent to a three-week low. The Chicago Board Options Exchange Emerging Markets ETF (EEM) Volatility Index, a measure of options prices on the fund and expectations of price swings, climbed 4.6 percent.
Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed today in Washington. Consumer confidence dropped last week to the lowest level since January, according to the Bloomberg Consumer Comfort Index.
The Bovespa fell 1.5 percent, the most since Aug. 14. Vale, based in Rio de Janeiro, lost 3.2 percent.
Eight of the 10 industry groups in the MSCI index advanced. Zijin Mining Group Co., China’s biggest gold producer, jumped 6.7 percent, the largest gain in more than two months.
The MSCI developing-nation gauge has advanced 6.3 percent this year, trailing an 8.7 percent gain in the MSCI World Index (MXWO) of developed countries. The emerging stocks measure trades at 10.4 times estimated earnings, compared with 13 times for the developed-nations index, data compiled by Bloomberg show.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries dropped two basis points, or 0.02 percentage point, to 316, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Hang Seng China Enterprises Index (HSCEI) gained 1.4 percent. The preliminary reading in a purchasing managers’ index for China released today by HSBC Holdings Plc and Markit Economics was 47.8, after July’s final 49.3 figure. If confirmed, it would be the weakest level since November.
“China has room to maneuver in terms of providing more liquidity to the market,” said Pankaj Kumar, chief investment officer at Kurnia Insurans. “With slowing economic numbers that we are seeing there, the Chinese need to act to ensure growth is sustained at a reasonable level.”
Fed policy makers said additional stimulus would probably be needed soon unless the U.S. economy shows signs of a durable pickup, according to minutes of their most recent meeting released yesterday.
Sinopharm, China Telecom
Sinopharm Group Co., China’s biggest pharmaceutical distributor, advanced 6.2 percent to its highest close since July 2011. Net income rose to 959.1 million yuan ($151 million) in the six months ended June 30, from 784.5 million yuan a year earlier, as broader health insurance coverage and higher subsidies spurred demand for medicines, the Shanghai-based company said in a statement today.
China Telecom Corp. (728), the country’s biggest fixed-line carrier, advanced 6.7 percent to a five-month high in Hong Kong after JPMorgan upgraded the stock to overweight. The company is likely to increase its dividend payout in 2013, analyst Lucy Liu wrote today.
Vietnam’s VN Index (VNINDEX) slumped 4.2 percent on speculation the detention of a banking tycoon this week will lead to further arrests in the financial industry, extending a three-day plunge to 10 percent.
Nguyen Duc Kien, who helped found Asia Commercial Bank, was arrested on Aug. 20 after he allegedly “conducted business illegally,” according to a central bank statement. The Supreme People’s Procuracy of Vietnam approved a warrant to detain Ly Xuan Hai, Asia Commercial’s chief executive officer, online newswire Petrotimes reported yesterday.
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