Emerging Stocks Gain on Stimulus Expectations
Emerging-market stocks gained for a fourth day amid expectations that U.S., Chinese and Indian central banks will act to stimulate their economies.
The MSCI Emerging Markets Index (MXEF) added 0.3 percent to 973.09 at 5:01 p.m. in New York for its longest streak of gains in a month. Brazil’s Bovespa (IBOV) index rose as homebuilder Gafisa SA (GFSA3) surged to a five-month high after saying it’s considering selling a stake in its Alphaville unit. Equity gauges in Chile, Hungary and Poland advanced. India’s Sensitive Index (SENSEX) climbed the most in Asia on speculation the government will cut borrowing costs.
The Federal Open Market Committee will discuss additional measures to stimulate the U.S. economy at a two-day meeting starting tomorrow while Chinese Premier Wen Jiabao said the country has “ample strength” to take monetary or fiscal steps to meet its economic goals. Germany’s Federal Constitutional Court said it will issue a ruling tomorrow on whether to allow the country to ratify the 500 billion-euro ($643 billion) European Stability Mechanism.
“With the ECB announcement last week, the likelihood the Fed will do something on Thursday and some possibility China will do the same, there is quite a lot of potential stimulus on the table,” John Lomax, an emerging-markets strategist at HSBC Holdings Plc, said in a phone interview from London. “When you’ve seen that collection of announcements, particularly on the monetary side, emerging markets have responded strongly over a period of time.”
The MSCI gauge has rallied 3.6 percent from a six-week low on Sept. 5 after China unveiled new spending plans for roads and subways and the European Central Bank announced a bond-buying program to support growth in the European Union, which purchases about 30 percent of exports from nations in the MSCI gauge. The Standard & Poor’s 500 (SPX) Index added 0.3 percent to 1,433.56.
The Bovespa rose to a three-week high as President Dilma Rousseff took steps to force power utilities to cut rates that manufacturers say are the fourth-highest in the world in a bid to make them more competitive. Cia. Energetica de Minas Gerais, Brazil’s largest utility by market value, fell 10 percent.
Hungary’s BUX Index rose for an eighth day, gaining 1.5 percent as INA Industrija Nafte (INARA) d.d., a Croatian oil refiner controlled by Mol Nyrt (MOL), said it discovered a “significant” oil well near Vinkovci, eastern Croatia. Mol rose 3.7 percent to a five-month high. Poland’s WIG20 Index (WIG20) added 0.8 percent and Chile’s IPSA rose 0.4 percent.
Fed Chairman Ben S. Bernanke said on Aug. 31 that the weak U.S. jobs market was a “grave concern.” A gauge of market expectations for additional stimulus rose to a record 99 percent in August, according to Citigroup Inc.
Wen said China has full confidence it will meet its economic goals for the year and signaled it may use a 100 billion yuan ($16 billion) fiscal stabilization fund to “propel stable economic growth.” Germany’s top constitutional court rejected a last-minute effort to delay a ruling over the euro zone bailout fund, saying it would issue its decision tomorrow.
India’s Housing Development Finance Corp. (HDFC), the biggest mortgage lender, climbed 2.5 percent to a two-year high as the Sensex rose 0.5 percent. An increase in fuel costs is “unavoidable,” oil minister S. Jaipal Reddy said today, a move that would help pare the fiscal deficit and prompt the central bank to ease monetary policy.
Tata Consultancy Services Ltd. (TCS), India’s largest software maker, advanced 1.5 percent to a record and Bharat Petroleum Corp. (BPCL), the second-biggest state-owned refiner, rallied the most in three weeks.
The Shanghai Composite Index (SHCOMP) declined 0.7 percent as Macquarie cut its 2012 growth forecast for China to 7.7 percent from 8.1 percent, saying it sees the slowdown continuing into the third quarter and limited room for monetary expansion next year amid inflationary pressure.
Gafisa jumped 13 percent and Anhanguera Educacional Participacoes SA (AEDU3) added 1.1 percent as the company was raised to buy from hold by JPMorgan Chase & Co.
The Micex slipped 0.1 percent as Goldman Sachs Group Inc. said Russia, the only major emerging-market country that hasn’t cut rates this year, is set to increase borrowing costs to arrest accelerating inflation.
The extra yield investors demand to own emerging-market bonds over U.S. Treasuries declined five basis points to 295, according to JPMorgan Chase & Co.’s EMBI Global Index.
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